Australians may need to brace for renewed pressure at the bowser following the collapse of a delicate detente between the US and Iran. Over the weekend, the Iranian regime’s Islamic Revolutionary Guard Corps again blocked access to the Strait of Hormuz, threatening vessels and stating the waterway would remain shut until a US naval blockade of Iranian ports ends. This action reverses a brief reopening a day earlier, which had seen peace negotiations appear to advance and access restored to about 20 per cent of global oil supply, sparking hopes for market stability.
The renewed closure threatens to undo recent market optimism. Last week, oil prices had seen some recovery after a major market shock in late February, which sent prices up by approximately 50 per cent in early March, pushing Australian petrol to $2.50 a litre and diesel beyond $3. While average diesel prices had settled back below $3 before the weekend, hopes for stable fuel supply lines to Australia, which imports most of its diesel and aviation fuel from overseas, are now in question. All eyes will be on the opening of major global oil markets in Asia on Monday morning.
AMP chief economist Shane Oliver warned more oil shocks are likely if the strait does not reopen swiftly, stating the “risk of a renewed spike in oil prices […] remains.” Australia’s reliance on imports, with ANZ estimating 55 per cent of its diesel and jet fuel demand tied to the Persian Gulf, underscores this vulnerability. Prime Minister Anthony Albanese has recently visited key trading partners to shore up energy deals. Energy Minister Chris Bowen noted on Saturday that Australia held 46 days of petrol, 31 days of diesel, and 30 days of jet fuel, with 61 additional ships en route. However, Oliver cautioned that prolonged closure could necessitate drastic actions like fuel rationing, risking a direct reduction in economic activity and the likelihood of recession.
