Aussie petrol prices: Trump’s move in Israel-Iran fight sparks warnings of bowser pain

Australians could be set for renewed pain at the bowser after US President Donald Trump stepped in to the raging conflict between Israel and Iran, with a shock weekend aerial strike.

Mr Trump claimed to have taken out Iran’s ability to enrich uranium through a bombing campaign on three key underground facilities.

The Middle Eastern nation has reportedly warned “all options” are on the table for a response.

That will leave the west’s energy security hanging in the balance, as Iran borders the crucial Strait of Hormuz waterway — a 33 kilometre-wide passage at its narrowest, which transits about 20 per cent of global oil supply.

Oil prices rallied on Monday morning as the threat of escalation loomed. Brent crude lifted more than 5 per cent to surge past $US80 per barrel, then retreated.

Share markets dropped only modestly, a signal that investors hope for a quick return to peace.

The benchmark ASX200 declined 0.4 per cent to 8,474.9 points, while Japan’s Nikkei225 and futures for the US S&P500 also slid slightly lower.

Iran has a range of options to hit back and their next move would determine whether the cost of oil gets pushed even higher, according to AMP chief economist Shane Oliver.

The country’s parliament reportedly green-lit a plan to close the Strait, putting a final call in the hands of Iran’s national security council.

Dr Oliver said a disruption to shipping in the waterway or an Iranian attack on the oil infrastructure of other Middle Eastern producers would have a major effect on the commodity’s market.

“As 20 per cent of global oil supplies and 25 per cent of LNG trade flows through the Strait, any disruption could push oil prices above $US100 a barrel, possibly to around $US150/bbl,” he said.

“This would likely only be brief, as the US military would likely quickly move to stop Iran.”

Oil reaching $US100/bbl would add 25 cents per litre to the price of petrol for Aussies, Dr Oliver said.

That’s on top of a 15¢/L increase already in the pipeline following the turmoil of recent weeks and would leave Perth drivers paying close to $2/L.

It would also mean cost of living pressure remains top of the agenda for Australian households, just as the four year fight against inflation appeared to be coming to an end.

But rising petrol prices may not drive overall inflation higher.

Consumers paying more at the pump will be forced to switch spending from other categories to petrol, reducing demand for discretionary goods and leaving less room for price hikes in other sectors of the economy, including services.

Inflation remained under control during oil price breakouts across more than a decade from 2002 to 2014.

The bigger factor determining inflation will be the level of stimulus pumped into the economy by central banks and governments — as with the famed 1970’s oil shocks which were followed by a prolonged period of low growth and high inflation.

Wider impact

Prices for key Aussie energy export LNG will likely also head higher and ANZ researchers expected a “meaningful” impact on gas.

“Over 20 per cent of the world’s LNG trade would be at risk, namely exports from Qatar,” ANZ researcher Aaron Luk said.

He said shippers would become “even more cautious” about entering the waterway to pick up cargoes from Qatar, which is the world’s third biggest producer.

Disruption following Russia’s 2022 invasion of Ukraine sent global gas prices soaring and a crisis in the Strait would again set a fire under the market.

That period led to huge profits for local oil and gas producers.

Yet in another sign that investors were unfazed by risk, the country’s biggest energy names treaded water.

Shares in Perth gas giant Woodside Energy finished the day unchanged at $25.85, while Santos lifted 1 per cent to $7.78.

ANZ’s Mr Luk said gold prices would also be driven higher by the upheaval, after a run of records which drove the commodity’s price above $5,200 per ounce earlier this year.

“The precious metal has been a relatively good hedge against uncertainty triggered by major geopolitical events,” he said in a research note.

“This Middle East conflict threatens to be one of the biggest issues facing the world in recent memory.

“The flight to safety by investors should see safe haven buying pick up.“

Strait to it

RBC Capital Markets head of strategy Helima Croft said Iran would struggle to close the Strait but may attack individual tankers.

“We have already heard reports of substantial Iranian jamming of transponders in and around the Strait, causing . . . maritime shipping authorities to issue warnings about navigating those waters,” she said.

“Iran may not have to do a very complex operation to cause companies to avoid the Strait.”

But she said it was too early to know how the Middle Eastern country would respond.

“Above all, we would caution against the knee-jerk “the worst is behind us” hot take at this stage,” Ms Croft said.

“President Trump may indeed have successfully executed an “escalate to de-escalate” move, but a wider expansion cannot still be ruled out at this juncture.”