The latest spike in oil prices driven by the Middle East conflict is now feeding through to everyday costs, as the effective shutdown of a key shipping passage sends global benchmarks above $US100 a barrel and looks set to push inflation towards the mid‑6% range by June, but that same surge risks putting fresh pressure on households already struggling with higher living costs.
Right now, one of the world’s most important oil routes in the Middle East is effectively closed, and that chokepoint usually carries around one‑fifth of global supply. Before the conflict, Brent crude hovered near $US70 a barrel and expectations for local inflation were already cautious but manageable, with official forecasts pointing to a peak of about 5% this year. The conflict has quickly changed that landscape, turning what looked like a short‑term risk into a broader cost‑of‑living squeeze.
With Brent crude now trading above $US100 a barrel, Australian drivers are seeing petrol prices climb past 250 cents a litre and that hit is spreading well beyond the service station. Transport costs are rising, which makes it more expensive to move food and goods, while airlines face higher fuel bills that tend to flow through to airfares. Economists say that even if the conflict eases soon, the disruption already in the system will keep pushing prices higher for months, as businesses reset their costs and pass them on to consumers.
In the bigger picture, the situation seems to be turning a regional conflict into a renewed global inflation shock, just as central banks and governments had hoped price pressures were under control. If inflation does drift into the mid‑6% range by mid‑year, it looks like it could delay any talk of interest rate cuts and keep budgets tight for households and businesses. Much still depends on how long the disruption to oil flows lasts, but the early signs suggest this latest shock may linger longer than many would like.
