Experts Caution Possible Inflation Impact on Australia Due to Middle East Tensions

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Key Points

Iran’s retaliation could disrupt oil supplies, causing inflation in Australia.
Petrol may increase by 25c/L if oil prices reach $100–$150 a barrel, according to AMP’s Shane Oliver.
A rise in petrol prices is expected to affect airfare costs, though not immediately.

Iran’s response to US military actions might result in higher fuel costs and increased inflation in Australia, experts claim.

Motorists have already noticed a slight increase in fuel prices following the US attacking three Iranian nuclear sites. In reaction, Iran retaliated by targeting the US-run Al-Udeid base in Qatar, which did not result in any damage or casualties.

While Australian consumers have been advised not to worry about the Middle Eastern tension, escalating conflict may lead to further price surges, AMP chief economist Shane Oliver notes.

“The potential risk lies in US intervention provoking Iranian action that disrupts oil supply,” he stated to the Australian Associated Press.

“If Iran successfully blocks the Strait of Hormuz, it would lead to a significant spike in oil and petrol prices with a severe economic impact.”

Oliver said petrol would rise by 25 cents per litre in the likely event oil prices skyrocketed to more than $100 a barrel.

He said an increase in petrol costs could push up inflation, which would flow on to other parts of the economy.

“If the oil price went to $100 to $150 a barrel and it’s a much bigger boost to inflation, the Reserve Bank of Australia would be inclined to wait before cutting interest rates again,” he said.

“The price of airfares could go up, as well as plastic prices, which affects a lot of household goods.”

An infographic titled "Strait of Hormuz" created in Ankara, Turkiye on June 17, 2025.

The Strait of Hormuz serves as a key conduit for oil and liquefied natural gas (LNG) from the Middle East to global markets through the Arabian Sea and the Indian Ocean. Source: Anadolu / Murat Usubali/Anadolu via Getty Images

Australian Travel Industry Association chief executive Dean Long said airfares were not likely to increase immediately following the escalation in conflict in the Middle East.

However, he said travellers heading through the Middle East on the way to Europe would likely face longer journeys.

“The increase in congestion is causing delays,” he told AAP.

“With the narrowest flight path in recent memory – with Russia, Ukraine, Iran and Israel closed – the airspace is very narrow to get to Europe.

“Previously, there were several options to recover delays and keep on schedule, but now there is a very narrow margin to recuperate delays, offering less error tolerance for airlines.”

Long said there had not been any major disruptions for Australian travellers so far and urged passengers not to cancel their flights.

Prime Minister Anthony Albanese has backed America’s intervention in the conflict between Iran and Israel.

While Iran should not have access to nuclear weapons, Mr Albanese said a de-escalation was needed.