As at mid-2026, the Australian economy is navigating significant uncertainty, driven by several headwinds: the Middle East conflict, major budget reform and successive interest rate hikes. The Middle East conflict drove a material increase in global fuel and energy prices through the first half of the year, feeding into household budgets and business operating costs. The RBA has raised the official cash rate three times in 2026 to 4.35%; however, headline inflation remains above their target at 4.0% in May.
Iran Conflict and Oil Price
The war between the US / Israel and Iran is now in its fifth month. Oil prices have eased from their peak but remain above where they sat before the conflict began. Globally, the response to the conflict drew heavily on emergency fuel supply. These drawdowns provided a meaningful but time- limited buffer to oil prices. Over time, these national oil reserves will need to be refilled. The additional demand created by refilling these reserves has the potential to keep oil prices elevated in the medium term.
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