Petrol prices could hit $2.20 a litre if Iran-Israel conflict sends oil above $US100 a barrel
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Australians could see petrol prices rise as high as $2.20 a litre, as analysts warn the spike in oil prices fuelled by the Israel-Iran conflict will flow "directly to the pump".
With the price of Brent crude oil hitting three-year peaks as the conflict escalates, there are forecasts it could surge above $US100 a barrel in coming weeks.
That could send the average national price of unleaded petrol, which is currently at $178.6 cents a litre, as high as $2.20.
How the Israel Iran conflict could derail the global economy. (Nassim Khadem)
With oil prices already up 20 per cent in just over a month, IG Australia market analyst Tony Sycamore said there's going to be further pain at the petrol bowser.
"If this became a protracted drawn-out affair, then most certainly we could see crude oil prices spike above $US100 without too many troubles," he told ABC News.
"Each $1 that crude oil goes up generally adds 1 cent to the price of petrol that we pay at the pump."
MST Financial senior energy analyst Saul Kavonic warned "higher oil prices will flow directly through to the pump", and that there could be much broader impacts.
"If you start to see prolonged higher prices or even an energy crisis scenario, it will also flow through to our electricity prices via international gas prices," Mr Kavonic said.
"It will flow through to cost of living, because nearly every single thing that you buy and use on a day-to-day basis has energy as a core input cost along its supply chain."
Mr Kavonic fears a prolonged conflict could plunge the world into a global energy crisis that could last years rather than months, and says there is now a greater chance of a global recession.
Fuel for inflation?
A big spike in the price of petrol and gas could reignite inflation.
Analysts say central banks, including the Reserve Bank could delay interest rate cuts, and may even have to hike them again.
Tony Sycamore said it would place central banks in a position where they are concerned by the global growth outlook due to the Trump administration's tariffs, but unable to cut rates as quickly as they might want to, if energy prices and inflation more broadly are elevated.
"It really does cloud the picture for central banks. It makes them in a bigger predicament than they already are."
Mr Sycamore puts the global recession risk around 30 to 40 per cent, depending on how the Middle East conflict unfolds.
"There's concerns that situation could escalate to the point where it causes a global recession," Mr Kavonic agreed.
"Indeed it'll be part of the reason why the Iranian regime's leadership would actually consider deliberately causing a global energy crisis in order to create global pressure on Israel to pull back."
Strait of Hormuz crucial to global supply
The extent of the oil price shock and the economic fallout will hinge in large part on the fate of the Strait of Hormuz.
The narrow passage, located between Oman and Iran, is the world's most important oil transit choke-point.
Roughly 20 per cent of global oil consumption and 25 per cent of global liquefied natural gas trade flows through there every day.
Its closure by Iran would have devastating consequences.
"If Iran was actually to look to permanently close that down, that is the kind of event that could directly draw the US and other Western countries into the war, as they look to protect passage through that Strait because it is so critical for global energy security," Mr Kavonic said.
The veteran energy analyst argued the market is underestimating the extent of the current crisis.
"My concern here is that we've seen so many headlines about a possible risk of supply for oil over the last few years, which haven't eventuated, that we now have a case of it's the boy who cries wolf.
"Until we actually see some disruption, the market remains relatively complacent."
Mr Kavonic likened the events of recent days to the Iran-Iraq War, the Arab oil embargo in the 1970s and 80s and the Iranian revolution.
"This is a much bigger potential geopolitical shift than what we've seen over the last decade or two.
"I don't think the market and policy makers are yet to appreciate how high the risk is and what the consequences could be globally."
While US President Donald Trump is hoping for a resolution, Iran's Foreign Minister Abbas Araghchi says they are hitting back at key strategic and economic sites in Israel.
Israeli Prime Minister Benjamin Netanyahu says they will continue to take action against Iran to prevent them from having nuclear weapons.
Written by Nassim Khadem and Stephanie Chalmers, ABC News.
With the price of Brent crude oil hitting three-year peaks as the conflict escalates, there are forecasts it could surge above $US100 a barrel in coming weeks.
That could send the average national price of unleaded petrol, which is currently at $178.6 cents a litre, as high as $2.20.
How the Israel Iran conflict could derail the global economy. (Nassim Khadem)
With oil prices already up 20 per cent in just over a month, IG Australia market analyst Tony Sycamore said there's going to be further pain at the petrol bowser.
"If this became a protracted drawn-out affair, then most certainly we could see crude oil prices spike above $US100 without too many troubles," he told ABC News.
"Each $1 that crude oil goes up generally adds 1 cent to the price of petrol that we pay at the pump."
MST Financial senior energy analyst Saul Kavonic warned "higher oil prices will flow directly through to the pump", and that there could be much broader impacts.
"If you start to see prolonged higher prices or even an energy crisis scenario, it will also flow through to our electricity prices via international gas prices," Mr Kavonic said.
"It will flow through to cost of living, because nearly every single thing that you buy and use on a day-to-day basis has energy as a core input cost along its supply chain."
Mr Kavonic fears a prolonged conflict could plunge the world into a global energy crisis that could last years rather than months, and says there is now a greater chance of a global recession.
Explosions from an Israeli attack on Sharan Oil depot in Iran, June 15, 2025. (Reuters/Majid Asgaripour/WANA)
Fuel for inflation?
A big spike in the price of petrol and gas could reignite inflation.
Analysts say central banks, including the Reserve Bank could delay interest rate cuts, and may even have to hike them again.
Tony Sycamore said it would place central banks in a position where they are concerned by the global growth outlook due to the Trump administration's tariffs, but unable to cut rates as quickly as they might want to, if energy prices and inflation more broadly are elevated.
"It really does cloud the picture for central banks. It makes them in a bigger predicament than they already are."
IG Australia markets analyst Tony Sycamore says central banks are now in a predicament. (ABC News: Daniel Irvine)
Mr Sycamore puts the global recession risk around 30 to 40 per cent, depending on how the Middle East conflict unfolds.
"There's concerns that situation could escalate to the point where it causes a global recession," Mr Kavonic agreed.
"Indeed it'll be part of the reason why the Iranian regime's leadership would actually consider deliberately causing a global energy crisis in order to create global pressure on Israel to pull back."
Emergency personnel inspect damage after missiles were launched from Iran into Tel Aviv on June 16, 2025. (Reuters: Ronen Zvulun)
Strait of Hormuz crucial to global supply
The extent of the oil price shock and the economic fallout will hinge in large part on the fate of the Strait of Hormuz.
The narrow passage, located between Oman and Iran, is the world's most important oil transit choke-point.
Roughly 20 per cent of global oil consumption and 25 per cent of global liquefied natural gas trade flows through there every day.
Its closure by Iran would have devastating consequences.
"If Iran was actually to look to permanently close that down, that is the kind of event that could directly draw the US and other Western countries into the war, as they look to protect passage through that Strait because it is so critical for global energy security," Mr Kavonic said.
The veteran energy analyst argued the market is underestimating the extent of the current crisis.
"My concern here is that we've seen so many headlines about a possible risk of supply for oil over the last few years, which haven't eventuated, that we now have a case of it's the boy who cries wolf.
"Until we actually see some disruption, the market remains relatively complacent."
Saul Kavonic thinks markets are not appreciating how high risks are currently to global oil supplies. (ABC News: John Gunn)
Mr Kavonic likened the events of recent days to the Iran-Iraq War, the Arab oil embargo in the 1970s and 80s and the Iranian revolution.
"This is a much bigger potential geopolitical shift than what we've seen over the last decade or two.
"I don't think the market and policy makers are yet to appreciate how high the risk is and what the consequences could be globally."
While US President Donald Trump is hoping for a resolution, Iran's Foreign Minister Abbas Araghchi says they are hitting back at key strategic and economic sites in Israel.
Israeli Prime Minister Benjamin Netanyahu says they will continue to take action against Iran to prevent them from having nuclear weapons.
Written by Nassim Khadem and Stephanie Chalmers, ABC News.
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