Picture yourself pulling into a petrol station sometime next week. The price board has shifted upward again, and the news playing quietly on your car radio is talking about the Middle East. That scenario, always theoretical in the past, is looking a good deal more concrete this morning.
On 28 February, the United States and Israel launched a massive joint military operation against Iran. The operation — codenamed Roaring Lion by Israel and Operation Epic Fury by the United States — targeted key officials, military commanders, and facilities, and included the killing of Supreme Leader Ali Khamenei. Iran retaliated with an unprecedented wave of strikes across the Middle East, targeting several nearby countries that host US military bases, as well as Israel. By Sunday morning Australian time, the region was in open, fast-moving conflict, and financial markets were bracing for a brutal Monday open.
In plain English, this means: oil prices are almost certainly going up, gold is going up, equities are probably going down, and your next trip to the bowser could sting a little more than usual.
The Oil Question Everyone Is Watching
Iran is the fourth-largest oil producer in OPEC and could threaten to make the Strait of Hormuz — a narrow waterway connecting the Persian Gulf and the Arabian Sea — unsafe for commercial traffic. More than 14 million barrels per day flowed through the Strait in 2025, or a third of the world's total seaborne crude exports, with about three-quarters of those barrels going to China, India, Japan and South Korea. Disrupting that flow, even partially, would send shockwaves through every economy on the planet.
Some oil majors and top trading houses have already suspended crude oil and fuel shipments via the Strait of Hormuz because of the attacks, according to four trading sources. Without signs of de-escalation over the weekend, prices could surge upward by as much as $10 to $20 per barrel when markets reopen, according to Jorge León, head of geopolitical analysis at Rystad Energy. At the more alarming end, a prolonged closure of the Strait of Hormuz would represent "a guaranteed global recession," according to energy analyst Bob McNally.
Offering some early indication of how markets could respond, perpetual swap futures tied to oil on the crypto exchange Hyperliquid — which allows 24/7 trading — jumped nearly 5% to $71.70 per barrel, while those for gold rose roughly 1.2% to $5,334 per troy ounce. That is a preview, not a guarantee, but it is not encouraging reading for anyone who drives to work.
There is one partial offset worth noting. OPEC+, of which Iran is a founding member, raised its production quota by 220,000 barrels per day on Sunday, above the expected 137,000-barrel-per-day adjustment. The move signals that other producers are trying to cushion the shock. Whether that is enough depends almost entirely on what happens next in the Strait.
What This Actually Means for Australia
Australia is not a frontline in this conflict, but the economic feedback loop is real and relatively quick. AMP chief economist Shane Oliver has been direct about the numbers. Oliver warned that if Iran successfully blocked the Strait of Hormuz, you would see a bigger spike in oil prices, with petrol rising by 25 cents per litre in the likely event oil prices skyrocketed to more than $100 a barrel — a development that could push up inflation and flow through to other parts of the economy.
For the Reserve Bank of Australia, that creates a serious dilemma. Oliver noted that if the oil price went to $100 to $150 a barrel and produced a much bigger boost to inflation, the RBA would be inclined to wait before cutting interest rates again. Households hoping for continued rate relief from the RBA — after the modest cut delivered earlier this year — may find those hopes deferred if oil prices stay elevated.
Beyond petrol, airfares could also rise, along with plastic prices, which affect a broad range of household goods. Airlines in particular are exposed: the conflict has narrowed available airspace over the region, adding pressure to an already complicated operating picture.
Markets Go into Defensive Mode
The fast-moving conflict across the Middle East is heightening investor anxiety and strengthening the case for safe-haven trades such as US Treasuries, gold and the Swiss franc. Alicia García-Herrero, chief economist for Asia-Pacific at Natixis, expects a "rough and risk-off" open on Monday, with global equities potentially down 1% to 2% or more.
For Australian investors, historical precedent offers a mixed sort of comfort. In June 2025, when Israel struck Iranian nuclear sites, equities sold off sharply at the open, then recovered once it became clear the Strait was not disrupted — and that is the pattern markets will reference on Monday, according to analysts. The critical variable, as it was then, is whether the Strait of Hormuz stays open. If it does, the sell-off may be brief. If it does not, investors are in genuinely new territory.
A prolonged Iranian retaliation would be particularly impactful for Asian markets, given their reliance on stable energy supplies and trade routes, according to Global X ETFs investment strategist Billy Leung, who expects global equities to open lower with heightened volatility, especially in high-beta and cyclical sectors. Australian energy stocks, by contrast, could see gains: the ASX energy sector rallied sharply following the June 2025 Israeli strikes on Iranian nuclear facilities, with names like Woodside and Santos benefiting from higher crude prices.
A Legitimate Debate About What Comes Next
The strikes have ignited genuine disagreement about their strategic wisdom, and it would be dishonest to pretend otherwise. Critics — including analysts at the Stimson Center — argue that air strikes alone cannot topple a government, and Iran in 2026 is likely to emerge battered but not broken. Trump's rejection of diplomacy in favour of force has the effect of incentivising proliferation and making adversaries hesitant to participate in negotiations with the United States. That is a serious argument, and it deserves to be taken seriously.
Supporters of the operation, on the other hand, point to years of failed diplomacy and a nuclear programme that was still advancing. President Trump stated that the strikes were aimed at ending a decades-long threat from Iran and ensuring it could not develop a nuclear weapon. In the weeks before the attack, Iran and the US had been in indirect nuclear negotiations mediated by Oman, and a second round of talks had been scheduled in Geneva — talks that ultimately produced no binding agreement. For those who back the operation, that diplomatic failure was the point of no return.
There is also a geopolitical dimension that Australian policymakers cannot ignore. Australia's Department of Foreign Affairs and Trade has long maintained that a nuclear-armed Iran represents a threat to regional stability. Prime Minister Anthony Albanese has reportedly backed the US intervention in principle, while calling for de-escalation. That is a careful line to walk, and events may force a clearer position in the days ahead.
The Honest Uncertainty
The honest answer about what happens next is that nobody knows for certain. Markets tend to be dispassionate when it comes to military conflicts; the only thing investors are ultimately focused on is whether the oil flows will be interrupted — once an initial spike is over, early rallies in commodities tend to fade. If Iran keeps the Strait open and the conflict stays contained, markets may recover faster than the weekend's anxiety suggests. If the conflict widens, the economic pain will be real, broadly shared, and hard to contain with monetary policy alone.
What does seem clear is that this is not a situation where reasonable people should simply pick a side and stop thinking. There are genuine trade-offs: between the long-term security risks of Iranian nuclear proliferation and the short-term economic costs of a wider war; between the value of military deterrence and the value of diplomatic engagement. Sitting with that complexity is uncomfortable, but it is more honest than pretending the answers are simple. Meanwhile, watch the Strait of Hormuz — and possibly your petrol receipt.