How the US-Israeli war against Iran could hit your wallet

Australians have been warned the cost of living could rise as the US-Israel war against Iran throws international trade into disarray.

Gasoline price increases are expected after oil prices rose to their highest level in four years Iran threatens the Strait of Hormuzthe shipping route on the southern border through which 20 million barrels of oil flow every day.

Social Services Minister Tanya Plibersek has said that “of course” there will be domestic economic consequences as a result of the escalating conflict in the Middle East.

“There was an economic impact from the Russian invasion of Ukraine that affected the whole world, including Australia,” Plibersek told Channel Seven’s Sunrise program on Monday. “Our global oil and gasoline production is ultimately influenced by what is produced in the Middle East.”

Rising petrol and diesel prices are expected to have a knock-on effect on Australians. It could drive up the cost of goods and services, as fuel is the basis for most international and domestic transportation.

International shock waves

Sea and air trade routes in the Middle East have been significantly affected by the conflict in the region.

Air travel has been disrupted across the region, with thousands of flights canceled and airspace over Iran, Iraq, Israel, Saudi Arabia, Kuwait and the United Arab Emirates closed.

The Strait of Hormuz, a 33 km wide chokepoint through which 20 to 30 percent of all global oil production passes, is “virtually closed”, according to Iranian state media. At least three tankers were damaged off the Gulf coast and one seafarer was killed in Iranian retaliatory strikes.

Danish shipping giant Maersk announced on Sunday it would halt transport through both the Strait and the Suez Canal, bordering Egypt, to ensure the “safety of our crews”.

They join several international shipping groups in avoiding the region as Iran exchanges rocket fire with Israel and has launched airstrikes on neighboring countries.

Maersk has said it will reroute ships around the Cape of Good Hope, adding thousands of miles to trade voyages.

Hapag-Lloyd and French shipping group CMA CGM have said they will apply a “war risk surcharge” to cargo traveling from large parts of the Middle East and northeast Africa.

What impact will it have at the gas pump?

The price of Brent crude rose 8.8 percent on Monday, while US crude rose 8 percent, taking Brent to US$79.34 (US$111.67) per barrel and US to US$72.38 (US$101.87).

NRMA spokesman Peter Khoury told reporters on Monday that he expects prices at the pump to rise by about 10 percent.

“The message to Australian drivers today is this: don’t panic initially. Whatever happens overseas will take about seven to 10 days to continue here at home,” Khoury told reporters in Sydney on Monday.

“So we shouldn’t see an immediate impact on the Bowser, and only then if things continue for a period of time and we don’t see the jump stabilize and prices come back.”

Queues around petrol stations have already been reported in some locations as people try to fill their cars before the expected climb.

“The other message we have is for the oil companies: don’t use this as an excuse to jack up your prices and make Australians pay more than they should,” Khoury said.

“Our hope is that prices will stabilize, but if things don’t de-escalate we could see those prices flow into the Australian market.”

US President Donald Trump has suggested the war could last four weeks.

“It’s always been a four-week process. We thought it would take about four weeks. It’s always been a four-week process, so – as strong as it is, it’s a big country, it will take four weeks – or less,” British newspaper The Daily Mail quoted Trump as saying.

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