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🇬🇧 United Kingdom /Economy & Trade

Australia interest rates likely to rise further if US-Iran conflict persists, economists warn

From The Guardian · () English

Translated from English, summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • Economists warn a fourth Australian interest rate rise this year is likely if escalating conflict between the US and Iran is not resolved within a week.
  • Resurgent oil prices, driven by US missile strikes and a new maritime blockade, have pushed Brent crude to US$85 per barrel and West Texas Intermediate to over US$80.
  • Higher oil prices could lead to a rate hike in August, impacting consumer confidence and potentially pushing inflation higher.

Escalating tensions between the United States and Iran could force the Reserve Bank of Australia to implement a fourth interest rate hike this year, economists warn. The conflict has already sent oil prices soaring, with Brent crude reaching US$85 per barrel and West Texas Intermediate surpassing US$80, levels not seen since early July.

The clock has started ticking again on global oil inventory depletion.

— Vivek DharVivek Dhar, energy commodities strategist at Commonwealth Bank, commenting on the potential impact of continued conflict on oil stockpiles.

Vivek Dhar, energy commodities strategist at Commonwealth Bank, stated that continued hostilities could deplete global oil stockpiles and drive prices significantly higher. He projected Brent oil could reach US$100 within 10 days and US$150 within 10 weeks if the conflict persists. Such price hikes in April led to Australian unleaded petrol reaching nearly 260 cents a liter and diesel close to 320 cents.

The clock has started ticking again on global oil inventory depletion.

— Vivek DharVivek Dhar, energy commodities strategist at Commonwealth Bank, commenting on the potential impact of continued conflict on oil stockpiles.

Peter Khoury, spokesperson for the NRMA, noted that while markets have factored in negotiation breakdowns, fuel costs will rise if elevated oil prices persist for over a week. This is compounded by the federal government's fuel excise relief set to expire on August 2, adding another 16 cents per liter. Matthew Hassan, head of Westpac’s macro-forecasting, linked resurgent oil prices to the bank’s prediction of an August rate hike, citing concerns about persistent inflation.

fuel would start to get more expensive if oil prices remained elevated for more than a week.

— Peter KhouryPeter Khoury, the NRMA spokesperson, discussing the impact of sustained high oil prices on fuel costs.

Financial markets have increased their bets on an RBA rate hike, with a 23% chance seen for August and over 50% by December. The RBA has already raised rates three times in 2026, bringing the benchmark to 4.35%. The renewed hostilities have also negatively impacted consumer confidence, according to the Westpac-Melbourne Institute tracker. Hassan observed that without the conflict, consumer confidence might have shown a more substantial recovery. While consumers were becoming less fearful of rate hikes and more hopeful about their finances, the conflict has shifted sentiment, with most remaining pessimistic and expecting further rate increases.

It will feed into their [the RBA’s] unease that this inflation will be persistent.

— Matthew HassanMatthew Hassan, head of Westpac’s macro-forecasting, explaining how resurgent oil prices influence the Reserve Bank of Australia's inflation concerns.
DistantNews Editorial

Originally published by The Guardian in English. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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