Iran-Israel conflict could create 'energy crisis we've not actually seen before', MST Financial's Saul Kavonic warns
Aussie drivers could face soaring petrol prices, adding to intense cost of living pressures, as the heated conflict between Iran and Israel may threaten global supply chains.
Concerns have mounted Iran will block the Strait of Hormuz - the narrow waterway between the Persian Gulf and the Gulf of Oman which facilitates the transportation of about a fifth of the world's oil.
Alongside this, Israeli attacks on oil facilities in Tehran and the South Pars gas field has sparked further concerns over prices.
Oil jumped about US$7 per barrel on Thursday evening (US time) after the conflict began.
MST Financial senior energy analyst Saul Kavonic said the recent jump was a 'risk premium' as the initial strikes had only targeted each nations' domestic energy infrastructure, but stressed there were major concerns about how the conflict would escalate.
'The risk here is twofold: One, could we see Israel directly attack Iranian exports, for example, on Kharg Island, which could take one and a half million barrels a day off the market,' Mr Kavonic told Sky News' Business Now.
'But also, could we see Iran target Western oil interests in Gulf States such as Iraq, which could also knock a few million barrels a day off the market.
'Just in that kind of scenario, you could see oil approach $100 a barrel.'
He said the 'most severe scenario' was if Iran shut down the Strait of Hormuz, as it would create an 'energy crisis such that we've not actually seen before'.
'It would exceed the extremes we saw in the wake of the Ukraine War in 2022 and the reality is our energy markets globally have low resilience,' Mr Kavonic said.
'Strategic stocks, particularly in the US, are at record low levels and we're not well placed to actually deal with a major supply disruption like that, if it was to occur.'
AMP's chief economist Shane Oliver issued a note on Friday warning Aussie drivers could soon see price hikes when they fill up their cars.
'Oil prices were already rising this month on signs of increasing risks and spiked another seven per cent after the attacks – with the rise so far this month threatening a flow on of around 12 cents a litre for Australian petrol prices if sustained at these levels,' he said.
NRMA spokesperson Peter Khoury said it was not clear exactly how much more Aussies would be forced to fork out at the bowser as the situation in the Middle East constantly changes.
'It's impossible to forecast what it's going to mean at the bowser,' he said.
'A jump of $7 a barrel, if that was to stay the way it is, that's equivalent to about six or seven cents a litre, but the Aussie dollar has also strengthened, so that negates some of that increase.
'It's really difficult to get a sense of what it is going to means at the bowser.'
The price rise will also depend on which city Aussie drivers live in, as the oil price follows its price cycle in each city, Mr Khoury said.
'It depends on where you live, but the trend has been for it to be falling - short of what happened last Friday with the kick-off of hostilities between Israel and Iran,' he said.
'How that plays out over the next few days will ultimately decide what sort of impact it'll have at the bowser.'
Israel launched operation "Rising Lion" early on Friday, targeting key Iranian nuclear and military sites and reportedly killing dozens of people, including top army commanders and atomic scientists.
In the days since, Iran has hit back by launching dozens of rockets and drones at Israel.
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The paper said the decision to cancel the July 1 meeting was also related to Japan's July 20 upper house elections, expected to be a major test for Ishiba's minority coalition government. Japan's move comes ahead of a meeting of the US-led NATO alliance in Europe next week, at which Trump is expected to press his demand that European allies boost their defence spending to 5 per cent of GDP. Japan has cancelled a regular high-level meeting with its key ally the US after the Trump administration demanded it spend more on defence. US Secretary of State Marco Rubio and Defence Secretary Pete Hegseth had been expected to meet Japan's Foreign Minister Takeshi Iwaya and Defence Minister Gen Nakatani in Washington on July 1 for annual security talks. But according to the Financial Times, Tokyo scrapped the meeting after the US asked Japan to boost defence spending to 3.5 per cent of gross domestic product, higher than an earlier request of 3 per cent. 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