What you need to know about Middle East conflict and higher oil prices, even if you don’t own a car

Oil is the starting ingredient for petrol, diesel and jet fuel. When its price rises, it can push up transport costs, which can gradually make many everyday things more expensive, even for people who never visit a service station.

Why oil is in the news right now

Oil prices have been in focus because markets have been trying to assess how much the conflict in the Middle East is going to affect shipping and global oil supplies. 

Oil is traded globally, and if markets think supply is going to get more restricted, prices rise as bidders increase their offers to get the supply they need.  The benchmark price for Brent crude initially rose sharply to around $US78 to $US79 a barrel when the conflict broke out. 

But as the conflict has continued, oil prices have swung wildly, reaching as high as $US119 a barrel, as markets constantly try to assess the latest developments to determine how long the conflict is likely to last and how severely oil and other energy infrastructure may be damaged. 

How long will this oil price volatility last?

Commonwealth Bank economists currently use a base case assumption that the conflict will last into May.

A lot of the attention is on the Strait of Hormuz, a narrow shipping route between Iran and Oman. The US Energy Information Administration estimates that in 2024, about 20 million barrels a day of oil flowed through the Strait, roughly 20 per cent of global petroleum liquids consumption. 

According to Commonwealth Bank Head of Mining, Energy and Commodities Vivek Dhar, more than 800 ships are currently stuck in the Persian Gulf waiting to leave through the strait. Prior to the war, around 135 ships crossed the strait every day.

Australia imports the vast majority of the fuel it needs from oil refiners based in Asia, and these refiners are in turn heavily reliant on supplies of oil from the Middle East. 

To try to reduce the risk of a shortage, the federal government has been working with various allies and trading partners to try to ensure ongoing supply.

What is ‘Brent crude’, and why does it matter?

Based on oil produced in the North Sea, ‘Brent’ is a widely used reference price for oil around the world. In everyday terms, it is the price people often mean when they say “oil is up” or “oil is down”.

It matters because many oil shipments are priced using Brent as the starting point. So if Brent rises and stays higher, the baseline cost of producing petrol, diesel and jet fuel tends to rise too.

Where oil prices have been recently, versus history

Context helps. In late 2025, Brent eased from around the high $US60s to the low $US60s, and early 2026 opened in the mid $US60s on a monthly average basis. 

That is lower than some of the big spikes many people remember.

In mid-2022, Brent was above $ US100 for long stretches and the monthly average was above $ US120 in June 2022.

In 2008, during the Global Financial Crisis, oil surged to record highs, with Brent’s monthly average above US$130 in mid 2008, and crude briefly hitting about $US147 a barrel at its peak.

In April 2020, demand collapsed during the pandemic and Brent’s monthly average fell to about $US18.

So the current jump matters, but what matters most for households is whether it lasts.

How higher oil prices can affect your life, even if you don’t drive

The petrol prices we all pay at the pump are the most obvious way higher oil prices affect our finances, but oil’s bigger impact is that it helps power transport across the economy.

If it costs more to move people and goods, that can push up costs in lots of places, including deliveries, freight, trade services and travel. A federal government-commissioned review of Australia’s fuel security published in 2020 puts it plainly: the economy relies on fuel, and large, long disruptions would have widespread impacts on daily life.

“Australia’s import dependency means we have a strong interest in making sure global oil supply chains continue to operate efficiently,” the report says.

Some of the major ways higher oil prices show up in the Australian economy include:

Groceries and deliveries

Most groceries spend time on a truck at some point. When diesel becomes more expensive, freight and distribution costs rise. Businesses do not always pass on those costs immediately, but if higher fuel prices stick, it can add upward pressure to shelf prices and delivery fees.

Small business costs

If your work involves driving, logistics, or deliveries, fuel is a direct input cost. Even if it doesn’t, higher fuel costs can flow through supply chains, squeezing margins and changing pricing decisions.

Flights, airfreight and travel

Conflict can disrupt air travel directly if airlines avoid certain airspace for safety. That can mean longer routes, more fuel use, delays, cancellations, or even turnbacks. It makes travel more unpredictable for passengers, and it can also affect airfreight timings and capacity and drive up costs.

The Australian dollar’s role

Fuel and refined petrol are traded internationally in US dollars. The ACCC notes that a lower Australian dollar can make imported fuel more expensive in Australian dollar terms, even if global prices are steady.

What it can mean for inflation and interest rates

Fuel is one of the more volatile parts of inflation, so it can move headline inflation around. In its February 2026 Statement on Monetary Policy, the RBA noted that headline inflation was boosted by higher prices in some volatile items, including fuel and travel. The ABS has also shown how swings in automotive fuel prices can have a big effect on the consumer price index, Australia’s primary measure of inflation.

There is a balancing act here. Higher oil prices can lift some prices, but they can also leave households with less spare cash to spend elsewhere. That can soften demand in other parts of the economy.

CommBank’s economists note that commodity prices, including oil, remain volatile amid geopolitical uncertainty, which is one reason the outlook can shift quickly.

“The most direct way an energy price shock can impact Australia is through fuel prices, which could lift inflation in the short term,” CBA Head of Australian Economics Belinda Allen said.

“We expect the RBA to look through any spike in petrol prices and headline inflation and continue to anticipate the RBA will lift the cash rate in May based on key Australian economic data points.

“However, if geopolitical concerns escalate and are prolonged, morphing into a large demand shock for the global economy, the balance of risks for the RBA could shift.”

Look back: what happened in past oil shocks

This is why oil spikes get so much attention.

In the 1970s, major oil shocks were linked to events in the Middle East, and they coincided with high inflation and economic strain. Those shocks also changed behaviour. When fuel costs rose and stayed high, people drove less and shifted towards smaller, more fuel-efficient cars. Governments also responded by improving co-ordination around emergencies, including the creation of the International Energy Agency after the 1973 to 1974 crisis.

More recently, oil spiked again in 2022 after Russia’s further invasion of Ukraine, with prices rising above US$100 per barrel and adding to global cost pressures. And in 2008, when oil surged to record highs, fuel became a major cost pressure for airlines.

The bottom line

Higher oil prices are not just a driver’s problem. Because transport touches almost everything, a sustained rise in oil prices can gradually lift costs across the economy, from deliveries to airfares, and can feed into inflation.