How the Iran-Israel-US conflict is affecting Australia beyond fuel prices

The Iran-Israel-US conflict is no longer just a foreign affairs story. In Australia, it has already pushed fuel prices sharply higher, forced Canberra to halve fuel excise from 1 April 2026 and added to the inflation pressure sitting over households and businesses. When the ACCC said average petrol prices across the five largest cities reached 219.7 cents per litre on 11 March 2026, the first hit was clear. The larger issue now is the second-round damage moving through freight, borrowing costs and consumer confidence.

Fuel prices have eased since the March spike, with the ACCC’s 10 April 2026 update noting that average retail petrol prices had broadly reflected the excise reduction in most monitored locations. But that has not removed the wider economic risk. Treasury’s early assessment, cited in the supplied material, pointed to an initial inflation impact, while Westpac’s conflict note outlined scenarios in which CPI could rise by 0.7 to 1.5 percentage points if disruption to oil flows becomes prolonged.

That matters because higher energy costs do not stay confined to the bowser. They pass into freight, groceries, imported goods and operating costs for small businesses. CommBank’s March 2026 briefing, referenced in the supplied material, pointed to rerouting and insurance pressures on logistics, while on 15 March 2026, diesel supply strains were already affecting planning in parts of Western Australia.

Interest rates add another layer. The RBA lifted the cash rate to 3.85 per cent on 3 February 2026, and Canstar’s March 2026 banking roundup noted that major banks had shifted towards expectations of further tightening if inflation stayed stubborn. For households with mortgages and businesses relying on credit, that pressure can outlast the initial fuel shock.

There is also a human and confidence dimension. The DFAT Middle East conflict page shows Australia has been urging eligible citizens in affected countries to register and monitor travel advice. So the real story is no longer just petrol. It is the chain reaction: fuel, freight, inflation, rates and softer spending.