Australian households face months of higher fuel, grocery and interest costs — even if the conflict in the Middle East ended tomorrow, economists warn.
University of Sydney associate economics professor David Ubilava said fuel prices were likely to ease once the conflict ended, but not sharply or fully back to pre-war levels.
The spike in fuel costs during the war has set off a chain reaction, with increased transport, processing and storage costs expected to flow through to groceries and other goods over the coming months.
“Fuel prices tend to have a forward-looking element, so much like they went up sharply as soon as the war erupted, they will likely start decreasing, albeit not as sharply and likely not all the way to their pre-war levels, once the conflict is resolved,” Dr Ubilava told NewsWire.
While consumers may eventually see some relief at the bowser, grocery prices are expected to rise more slowly, as inflation — the pace at which prices increase — starts to accelerate.
“That is bound to happen, as the months of elevated costs of processing, transportation, and storage, all linked to fuel prices, will find their way onto grocery shelves,” Dr Ubilava said.
“Because prices, on average, always go up … the issue is when they go up faster than desired, and that is where we are headed at the moment.”
Almost every industry that relies on fuel is expected to feel the impact, from logistics to manufacturing.
The Reserve Bank has already begun responding, with interest rate hikes likely influenced by the conflict.
“If, prior to the conflict, markets anticipated one or two hikes in 2026, now this number has at least doubled,” Dr Ubilava said.
Even if shipping routes such as the Strait of Hormuz reopen quickly, relief for Australian motorists will take time.
Crude oil shipments from the Middle East must travel to East Asia for refining, then on to Australia — a process that can take weeks, if not months.
Global markets may also price in the risk of future conflicts, keeping premiums and prices higher for longer.
The government has acted to ease pressure by cutting fuel excise and securing supplies, but consumers may still need to adjust behaviour, such as driving less or opting for cheaper grocery options.
“Most people are rational and they optimise their decisions subject to constraints,” Dr Ubilava said.
