The 2026 US-Iran war has done something most distant conflicts never manage: it has reached directly into Australian mortgage repayments and petrol bills. The headlines frame it as a faraway crisis, but the path from the Persian Gulf to an Australian home loan is short and direct, and it runs through one variable that decides property prices more than any other: interest rates. Here is what the war has actually done, and what it means for buyers.
The trigger: an oil shock without modern precedent
The war began with US and Israeli strikes on Iran from February 2026, and the decisive moment for markets came on 4 March, when Iran declared the Strait of Hormuz closed and began attacking shipping attempting to transit it. The Strait carries roughly 27% of the world's seaborne crude oil, and its disruption removed a large share of global supply at once. Oil responded accordingly: West Texas crude rose from about $60 a barrel in late January to the $90s through March, with Brent spiking past $120 at the peak of the closure.
The chain to Australian inflation
Australia imports the global oil price, so the shock landed here quickly through petrol. Fuel prices climbed to record highs, adding roughly $20 a week to the average household's fuel bill. That feeds straight into inflation: headline CPI, already at 3.8%, has been pushed higher, with forecasts of it heading past 4% and potentially toward 5% through the year if energy costs stay high.
The RBA's response is the channel to property
Faced with an oil-driven inflation spike on top of already-sticky price pressures, the Reserve Bank reversed course and began raising rates again. After cutting through 2025, it lifted the cash rate to 3.85% in February, then to 4.1% in March and to 4.35% in May, with markets pricing further increases toward 4.70% by year-end. Higher rates lift mortgage repayments, reduce how much buyers can borrow, and put downward pressure on prices.
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