Summary
The chance that Australia’s Reserve Bank will raise interest rates has doubled due to rising fuel prices caused by worsening conflict between the US and Iran. The fighting has pushed global oil prices up sharply, increasing costs for drivers and putting pressure on the Australian economy.Key Facts
- Market forecasts now see nearly a 30% chance of an interest rate increase by August and an 80% chance by November.
- Fuel prices in Australia are rising, with diesel up 40 cents to about $2.10 per litre and unleaded petrol up 25 cents to about $1.75 per litre.
- The ceasefire between the US and Iran has broken down, causing Brent crude oil to jump 23% to nearly $90 per barrel.
- Iran has declared “full-scale war” with the US, and Houthi rebels threaten to block Saudi oil shipments through the Red Sea.
- Analysts warn global oil stocks are low, risking further price spikes possibly up to $150 a barrel if the conflict worsens.
- Higher fuel prices and conflict-induced inflation may slow Australia’s economy, which is already weakening due to previous interest rate rises and housing market issues.
- Despite market moves, some economists predict only one more rate hike this year unless the conflict severely escalates.
- The Australian government might reintroduce fuel tax relief if prices spike sharply to ease the burden on households.
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