Inflation may hit four-year high amid Middle East conflict

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Australians could soon face petrol prices above $2 per litre as rising global oil costs push inflation higher, economists warn.

The surge follows escalating tensions in the Middle East and concerns over shipping disruptions through the Strait of Hormuz. Oil prices have already climbed above US$84 a barrel, increasing pressure on fuel prices across Australia.

Economists at National Australia Bank say the spike could lift Australia’s inflation rate higher than previously expected. Headline inflation could peak around 4.75 per cent, about 0.5 percentage points above earlier forecasts.

If oil prices continue rising towards US$100 per barrel, analysts warn inflation could climb above five per cent, levels last seen during the economic shocks following the Russian invasion of Ukraine.

Higher fuel costs may also push up the price of everyday goods. Economists say transport, farming and logistics sectors rely heavily on fuel, meaning increases at the pump could eventually flow through to supermarket prices.

Farmers, in particular, depend on diesel to run tractors, irrigation systems and harvesting equipment. Any disruption to fuel supply could impact production of items such as fruit, vegetables, meat, seafood and dairy products.

Jim Chalmers warned the economy may face “intense volatility” as global tensions continue.

Meanwhile, Chris Bowen said the current pressure on fuel supplies is mainly due to a surge in demand, as some motorists rush to fill tanks and stockpile petrol.

Despite the increased demand, authorities say Australia still has adequate fuel reserves, though prices could remain elevated while global markets remain unstable.

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