Regular unleaded averaged $1.55 a litre in July. By September it averaged $2.11 (Ikonomou, 2026). That jump is one link in a chain running from a contested shipping lane in the Middle East to the interest rate on Australian home loans.

What has happened in the Strait of Hormuz?

About one-fifth of the world’s oil passes through the Strait of Hormuz. Its effective closure during the US-led war on Iran sent fuel prices up 33% in a single month in March (Shteyman, 2026). Oil peaked at about US$113 a barrel in April (No need to panic about fuel prices, 2026).

The disruption has not resolved. In September, with tankers being targeted and sunk in the Strait by both sides, global oil prices climbed back above US$100 a barrel (Ikonomou, 2026).

How did the oil shock reach Australian inflation?

Fuel moves through the whole economy. It is a direct household cost at the bowser, and an indirect cost in freight, food, manufacturing and anything trucked to a building site.

The ABS figures show the effect. Headline inflation jumped to 4.6% in March from 3.7% a month earlier (Shteyman, 2026). Australia also spent A$33 billion on imported crude and refined fuel in the first four months of the war, more than 70% above the same period in 2025 (Iran war takes heavy toll, 2026). By August, annual CPI was still running at 4.0% (Australian Bureau of Statistics [ABS], 2026).

The war did not create Australia’s inflation problem on its own. Underlying price pressures were already evident before the conflict began (Shteyman, 2026). Oxford Economics (2026) described the war as adding energy, shipping and transport costs on top of domestic capacity constraints that had been building for some time.

Why does the RBA respond to a war it cannot control?

The RBA cannot reopen a shipping lane. What it can influence is whether a one-off price spike turns into persistent inflation through wages, contracts and expectations. That second-round risk is why the RBA has raised the cash rate four times this year, taking it to 4.60%.

CommBank’s economists named the Iran war the biggest threat to Australia’s outlook in May, warning that a drawn-out conflict would push prices higher and raise the prospect of further rate rises (Commonwealth Bank of Australia, 2026).

What does the oil shock mean for property?

Borrowing costs. Higher rates reduce how much buyers can borrow, which flows through to what they can pay. That pressure is already showing in falling home values across most capitals.

Construction costs. Diesel, freight and energy-intensive materials such as steel, concrete and glass all feed into build prices. That matters more than usual this year, because the federal budget changes now steer investors toward new builds.

Confidence. Buyers and sellers both hesitate when the outlook depends on a conflict nobody can forecast. Oxford Economics’ (2026) prolonged war scenario includes a sharp Australian recession; a quicker resolution would likely see confidence recover sooner (Commonwealth Bank of Australia, 2026).

Will prices fall once the war ends?

Not straight away. University of Sydney economist David Ubilava said supply chains would take time to return to pre-war conditions even after the conflict ends, and that the effects would be felt for months (Australia fuel prices set to rise, 2026).

What should buyers and investors watch?

Plan your finances on the assumption that fuel-driven inflation takes months to unwind, even if a ceasefire arrives tomorrow.

Frequently asked questions

Is the Iran war affecting Australian house prices? Indirectly, yes. The war has added to inflation, which has contributed to higher interest rates, and higher rates reduce borrowing capacity and buyer demand.

Why did Australian inflation rise in 2026? Higher fuel and energy costs linked to the Iran war added to price pressures that were already building in the domestic economy.

References