Australia likely to experience inflation consequences due to escalating Middle East conflict, experts caution.

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Key Points

Iran’s retaliation may disrupt oil supplies, fuelling inflation in Australia.
Petrol could rise 25c/L if oil hits $100–$150 a barrel, warns AMP’s Shane Oliver.
A rise in petrol prices will likely impact airfare prices, though not immediately.

Iran’s retaliation to US military strikes could lead to a surge in the price of fuel and higher inflation in Australia, economists say.

Motorists have already seen a slight rise in the cost of fuel after the US launched strikes against three Iranian nuclear facilities. In retaliation, Iran has struck the US-run Al-Udeid base in Qatar without causing damage or casualties.

While Australian consumers have been told not to panic about the Middle Eastern unrest, escalating conflict in the region could lead to further price hikes, AMP chief economist Shane Oliver says.

“The real risk would be if intervention by the US sets off retaliation by Iran that disrupts oil supplies,” he told the Australian Associated Press.

“If Iran do successfully block the Strait of Hormuz, then you’ll end up with a bigger spike in oil prices and petrol and that will have 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 connects oil and liquefied natural gas (LNG) production in the Middle East to global markets via 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.

“Beforehand, there were multiple ways to catch up delays and stay on times, but in reality, there is a very narrow window to catch up delays, and there is less room for error by the 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.