This is the only outcome markets should fear in Iran-Israel conflict
Amid all the turmoil on markets in recent months, the fall in the price of oil – down from $US80 a barrel in January to a low of $US55 a barrel in early May – has been a little ray of sunshine. It has acted as a counter to any inflationary pressure from tariffs, and provided a tailwind for consumers and businesses straining under an interest rate environment that remains very different to the one they've known for the past decade.
So the sharp spike in oil following Israel's air strikes against Iran – crude leapt 12 per cent to around $US77 a barrel – is a headache global markets didn't need.
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Sydney Morning Herald
11 hours ago
- Sydney Morning Herald
Australia an energy target as Iran-Israeli war triggers global turmoil
It does not appear to be a coincidence that hours after Israel started raining bombs down on Iran, one of the embattled country's neighbours, Abu Dhabi, pounced with an audacious offer that Australian energy giant Santos could not refuse. After making two offers over a week in March, the suitors are now putting $36 billion cash on the table, including debt, for one of our gas sector giants. If successful, it would be the largest ever cash offer in Australia's corporate history. Abu Dhabi's state-owned oil company, the Abu Dhabi National Oil Company, the world's 12th largest oil company by production, is the major player behind the bid via its $US80 billion ($123 billion) overseas investment arm XRG. This business was launched last year with a mission to meet rising global demand for lower-carbon energy and to become one of the five biggest integrated global gas and LNG businesses. So why does a state, a part of the UAE, which is awash in oil, make such a huge bet on becoming a global LNG business? Loading There are two core reasons: geography and the green energy transition. The Israel-Iran conflict, and the threat of escalation if US President Donald Trump drags the US into it, will send global oil prices soaring for one key reason: any existential threat to Iran's leadership could lead to an effective blockade of the Strait of Hormuz. It is a crucial choke point in the global energy supply chain, and not just for oil. Middle East LNG exports are even more reliant on the strait than is oil, and there are fewer alternatives to shipping LNG through the strait.
West Australian
4 days ago
- West Australian
‘More uncertainty': Rate cut on the cards as economic fallout continues
In mixed news for households, the conflict between Israel and Iran is unlikely to impact future rate cuts unless the worst-case scenario plays out. Economics forecasts say the conflict that started on Friday will add about 0.2 per cent to headline inflation on the back of higher petrol prices. AMP chief economist Shane Oliver told NewsWire the escalation just added more 'uncertainty' but hadn't changed the probability of a July rate cut. 'I don't think the probability of a July cut has changed, we still expect a rate cut in July, August, November and February, taking the official cash rate to 2.85 per cent,' he said. IG market analyst Tony Sycamore said it would all depend on the fallout, with the worst-case scenario being Iran blocks the Strait of Hormuz, which is the primary route for oil producers including Saudi Arabia, Iraq, the UAE, and Kuwait. While pointing out blocking the Strait of Hormuz was a 'last resort' move by Iran, Mr Sycamore said if it did happen, it could impact interest rates. 'This would hamper central banks' ability to cut interest rates to cushion the anticipated growth slowdown from President Trump's tariffs, which adds another variable for the Fed to consider when it meets to discuss interest rates this week,' he said. Mr Oliver agreed, saying any blockage could lead to a dramatic spike in oil prices. 'During the Ukraine conflict we saw oil get to above $US120 a barrel, which would see petrol prices push well above $2 a litre, impacting inflation and more importantly household spending power,' he said. 'The RBA would then have to work out what is more important and I suspect they would look through the inflation spike and be more concerned about the negative impact on economic growth.' Regardless of whether it sways the Reserve Bank of Australia, the fallout will still hurt Australian consumers. Futures markets for Brent oil have spiked in recent days and are now pricing $US77 a barrel when it was just more than $US65 this time last week. Every $US1 increase in the price of oil roughly adds 1 cent a litre to how much Aussies will pay when they fuel up. MST Financial senior energy analyst Saul Kavonic warned that 'higher oil prices will flow directly through to the pump', adding to the cost-of-living pressures. 'If you start to see prolonged higher prices or even an energy crisis scenario, it will also flow through to our electricity prices via international gas prices,' Mr Kavonic told the ABC. He said this would eventually hit Australian consumers. 'It will flow through to the cost of living because nearly every single thing that you buy and use on a day-to-day basis has energy as a core input cost along its supply chain,' Mr Kavonic said.
Perth Now
4 days ago
- Perth Now
What Iran crisis means for rate cut
In mixed news for households, the conflict between Israel and Iran is unlikely to impact future rate cuts unless the worst-case scenario plays out. Economics forecasts say the conflict that started on Friday will add about 0.2 per cent to headline inflation on the back of higher petrol prices. AMP chief economist Shane Oliver told NewsWire the escalation just added more 'uncertainty' but hadn't changed the probability of a July rate cut. 'I don't think the probability of a July cut has changed, we still expect a rate cut in July, August, November and February, taking the official cash rate to 2.85 per cent,' he said. Petrol prices could jump on the back of the Israel-Iran crisis. NewsWire / John Gass Credit: News Corp Australia IG market analyst Tony Sycamore said it would all depend on the fallout, with the worst-case scenario being Iran blocks the Strait of Hormuz, which is the primary route for oil producers including Saudi Arabia, Iraq, the UAE, and Kuwait. While pointing out blocking the Strait of Hormuz was a 'last resort' move by Iran, Mr Sycamore said if it did happen, it could impact interest rates. 'This would hamper central banks' ability to cut interest rates to cushion the anticipated growth slowdown from President Trump's tariffs, which adds another variable for the Fed to consider when it meets to discuss interest rates this week,' he said. Mr Oliver agreed, saying any blockage could lead to a dramatic spike in oil prices. 'During the Ukraine conflict we saw oil get to above $US120 a barrel, which would see petrol prices push well above $2 a litre, impacting inflation and more importantly household spending power,' he said. 'The RBA would then have to work out what is more important and I suspect they would look through the inflation spike and be more concerned about the negative impact on economic growth.' Higher oil prices could flow through to the wider economy. NewsWire/ Gaye Gerard Credit: News Corp Australia Regardless of whether it sways the Reserve Bank of Australia, the fallout will still hurt Australian consumers. Futures markets for Brent oil have spiked in recent days and are now pricing $US77 a barrel when it was just more than $US65 this time last week. Every $US1 increase in the price of oil roughly adds 1 cent a litre to how much Aussies will pay when they fuel up. MST Financial senior energy analyst Saul Kavonic warned that 'higher oil prices will flow directly through to the pump', adding to the cost-of-living pressures. 'If you start to see prolonged higher prices or even an energy crisis scenario, it will also flow through to our electricity prices via international gas prices,' Mr Kavonic told the ABC. He said this would eventually hit Australian consumers. 'It will flow through to the cost of living because nearly every single thing that you buy and use on a day-to-day basis has energy as a core input cost along its supply chain,' Mr Kavonic said.
