The U.S. and Israel launched a joint strike on Iran over the weekend, killing the country’s Supreme Leader, Ayatollah Ali Khamenei.
In the days since, there’s been an escalating exchange of retaliatory strikes across the Middle East.
Experts are now warning that global oil prices could surge.
What does that mean for the cost of petrol in Australia? Here’s the latest.
Context
The strikes came after indirect nuclear negotiations between the U.S. and Iran ended last week without a clear deal.
U.S. President Donald Trump said White House officials “projected four to five weeks” of conflict.
However, he warned the U.S. has the capability “to go far longer than that,” and will do “whatever it takes”.
Strait of Hormuz
Amid the escalating conflict in the region, Iran has closed access to the Strait of Hormuz.
The Strait is a 33-kilometre-wide shipping lane off its southern border.
Roughly 20 to 25% of the world’s oil and liquefied natural gas (which is used to heat homes and generate electricity) is shipped through the Strait of Hormuz every single day.
At least three oil tankers have reportedly been struck near the Strait, as hundreds more anchor just outside.
Major shipping companies have announced they'll stop using the Strait of Hormuz and reroute ships around the Cape of Good Hope, the southernmost point of Africa.
This decision will add thousands of kilometres to each shipment’s journey.
Price impact
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Oil is bought and sold all over the world, which means prices are set globally. A disruption in one part of the world can affect prices everywhere.
In general, oil becomes more expensive either when there is more demand for it or when there is less supply.
Trade route disruptions typically send oil prices soaring, as we saw when Russia launched its invasion of Ukraine in 2022.
Before the current U.S-Iran conflict, oil was sitting at around $US67 a barrel.
By Monday, global oil prices jumped 12% to around $US80 a barrel, the highest point since the U.S. struck Iran in June 2025.
Some oil-producing nations, such as Saudi Arabia and Russia, have agreed to increase oil supply by 206,000 barrels a day to help ease global supply.
Australia
Many Australians will feel the effects of the U.S-Iran conflict at the bowser.
A widely accepted rule of thumb is that every $US10 increase in the price of a barrel adds roughly 10 cents to the cost of fuel at the pump here in Australia.
Economists believe the price could reachS$US100 a barrel over the coming days. After that point, Australians can expect to pay upwards of $2 a litre.
However, the price hike may take some time to be felt.
Climate Change and Energy Minister Chris Bowen said oil stocks are “the highest they have been for any time in 15 years.”
On Monday, Bowen said Australia had a 36-day petrol supply, and “34 days in relation to diesel, [and] 32 days in relation to jet fuel”.
There are also concerns that panic-buying could drive up petrol prices prematurely.
NRMA spokesperson Peter Khoury warned retailers against using this “as an excuse to jack up your prices and charge Australians more than they should be paying.”
