Motorists may have to brace themselves for prolonged high fuel costs, experts suggest, as tensions escalate in the Middle East. The conflict involving Houthi rebels shows no signs of easing, and with the U.S.-Iran relations still fraught, relief at the gas pumps seems distant.
Over the weekend, the Iran-supported Houthi rebels launched a missile at Saudi Arabia. This development occurred while U.S. President Donald Trump was contemplating new military actions against Iran, though he remains open to negotiating a diplomatic solution.
Notably, the possibility of reaching a diplomatic agreement has not been entirely ruled out.
The Houthi forces accused Saudi Arabia, a U.S. ally, of escalating tensions after the kingdom launched attacks on their military installations last Friday. This retaliation was in response to the Houthis’ announcement of a maritime blockade affecting the world’s leading oil exporter and their attacks on Saudi vessels in the Red Sea.
This escalation introduces a new dimension to the ongoing regional conflict, which intensified following U.S. and Israeli military actions against Tehran in February. Compounding the situation, Iran’s blockade of the Strait of Hormuz—Riyadh’s only alternate maritime passage—adds further strain to the global oil supply chains.
Saudi Arabia did not immediately comment on the Houthis’ Ansarollah media post on Telegram on Saturday that a “Yemeni missile strike” had sparked fires in Jizan. But Riyadh’s civil defence agency issued brief warnings to residents in the city — as well as another city, Yanbu — early on Saturday.
The warning came after the Saudi-led coalition said Friday it had hit Houthi sites and destroyed targets threatening commercial vessels in response to attacks on Red Sea shipping.
A Yemeni security source told AFP a naval base in the port city of Hodeida and a military camp on Kamaran island were among the Saudi targets.
The Houthis claimed attacks on two Saudi ships earlier this week, with Saudi Arabia confirming one of the attacks in the Red Sea.
Trump’s shifting rhetoric
The escalation came after Trump suggested he was holding off on a major operation as Tehran was now getting “serious” in talks with Washington.
“No, I haven’t,” Trump told journalists in the Oval Office when asked if he had made a decision on hitting Iran hard, for now dialling back reports that he was increasingly frustrated with the war and mulling a large-scale military operation.
“We are talking to them. I think they’re being serious. I think … they are being by far the most serious that we’ve seen them, but that doesn’t mean we get there,” Trump told reporters at the White House.
Trump has in recent days threatened to expand targets being struck in Iran to include energy plants and bridges, to send ground forces to seize its Kharg Island oil hub and to bomb a deep-underground nuclear-linked site known as Pickaxe Mountain.
Trump told Axios on Thursday that he was considering relaunching major combat against Iran. “They haven’t received enough pain yet,” the US news outlet quoted him as saying.
However, on Saturday, the US military broke its daily announcement of fresh strikes on Iran, following 13 nights in a row hitting military targets there.
Asked about his exit strategy for the war, he said: “There’s a military exit where we just keep going just the way we are, and we can even make it a heavier dose, and it’s knocking out everything they have. Or there’s a smarter strategy that you make a deal.”
But he added: “We’re locked and loaded. We’re ready to go.”
Continuing disruption to oil exports
The entrance to the Gulf has so far been the focus of a war that has killed thousands of people in almost five months, stoked global inflation and fanned fears of an economic downturn.
The Houthis, who control northern and western Yemen, have announced a naval blockade on Saudi Arabia, which has diverted millions of barrels of oil each day by pipeline to the Red Sea to skirt Iran’s near-total blockade of the Strait of Hormuz.
After the Houthis said they had struck two Saudi tankers on Thursday, Trump said he would hold Iran accountable for any further attacks by the fighters.
On Saturday, several strikes hit Yemen’s Hodeidah port, eyewitnesses said.
The Saudi-led coalition in Yemen said it carried out a “proportionate military response operation” that targeted Houthi military sites in Hodeidah governorate.
The US military launched air strikes on Iran for a 13th consecutive night of attacks, prompting Iran to fire at neighbouring Arab countries that host US bases.
In a statement carried by Iran’s Fars news agency, the Revolutionary Guards warned the populations of Gulf countries of potential strikes against US military personnel who may be using “buildings in cities as locations to direct their crimes”.
In a statement on X, the Iranian health ministry said 59 people had been killed and 666 wounded since the resumption of clashes with US forces in late June.
Iranian media cited the head of Iran’s top joint military command as saying Iran would kill a member of the US forces for every Iranian killed. The war has killed 18 US service members.
The Pentagon said on Monday 100 service members had been injured since 7 July and 96 per cent have returned to duty.
Officials have told Reuters that more than 500 US troops have been injured so far.
The Houthi attacks forced several other tankers to turn around and head north through the Suez Canal, potentially using a much longer route to reach Asia by sailing around Africa. Shipping insurance costs through the southern Red Sea doubled for some companies, sources said.
Petrol price hikes not over
Renewed fighting in the Middle East also means continued higher prices for motorists — something that will be compounded by the upcoming end of the federal government’s temporary cut to fuel taxes.
The scaled-back extension of the fuel excise reduction of 16 cents per litre for petrol and diesel will apply until 2 August and is unlikely to be extended again.
The intensifying conflict had caused petrol prices to jump in Australia by three cents overnight, with the average for unleaded $1.85, NRMA spokesman Peter Khoury said.
Diesel had also jumped by up to five cents, with the average cost $2.26.
“We’re seeing prices start to head north, and wholesale prices have also gone up,” he said.
“That’s going up about 10 cents this week, so those increases are likely to flow on.”
Khoury said the government had secured Australia’s fuel supply, but that would not impact the high prices motorists were likely to face.
“Unfortunately, until the war ends in the Middle East and they have reopened the Strait of Hormuz, price is going to continue to be volatile,” he said.
With so much of Australian industry — including mining, agriculture and transport — run on diesel, the broader economic impact would be “extensive”, Khoury added.
Australia sources most of its imported fuel from regional Asian markets, which prompted Prime Minister Anthony Albanese to travel earlier this year to key partners such as Singapore to shore up the nation’s supply.
The government has continued to review its policy settings to help manage hip pocket pain for motorists, Treasurer Jim Chalmers said.
“We extended our cut to the fuel tax for another month to help take the sting out of petrol prices for Australian motorists and businesses,” Chalmers said.
“This extra month of fuel tax discount is helping Australian motorists and businesses with the cost of living as this support tapers off.”
Bowen says fuel supply is ‘solid and secure’
Energy Minister Chris Bowen said on Saturday that, while the Middle East situation continued to be uncertain, “one thing Australians can be certain about is our fuel supply continues to be solid and secure”.
He said that, should no new supplies arrive, the nation had 42 days of petrol, 38 days of diesel and 32 days of jet fuel, totalling 6.2 billion litres of fuel, which was 15 per cent more than what was held when the US started bombing Iran in February.
There are 51 ships en route to Australia and 3.1 billion litres of fuel locked in to be delivered in the next four weeks, he added.