Brent crude settled at US$83.25 a barrel on Monday night, up 9.5 per cent in a single session, after Donald Trump said he was reinstating a blockade on Iranian shipping and demanded a 20 per cent payment on cargoes moving through the Strait of Hormuz. West Texas Intermediate rose 9.2 per cent to US$78. For Australian households the question is not whether that reaches the bowser. It is when.
The starting point is already high. The ACCC's most recent weekly report, covering prices to 8 July, put average petrol across the five largest cities at 167.5 cents a litre, up 16 cents in nine days, with diesel at 185.8 cents. Most of that rise was tax: the fuel excise discount was halved on 1 July, worth up to 17.6 cents a litre at the pump once GST is counted. Monday's barrel sits on top of all of it.
The currency is working against motorists at the same time. The Australian dollar has been trading near 69.3 US cents, around its lowest in three months, as the crisis pushes money toward the US dollar. Fuel is bought in US dollars, so a weaker currency raises the landed cost of every litre before the barrel moves at all.
The 20 per cent demand is a new kind of cost. On a loaded supertanker it works out to roughly US$30 million per transit, and no mechanism for collecting it has been described. A charge of that size, if it is ever collected, lands in freight rates and cargo prices, and the end of that chain is a checkout or a bowser.
The Reserve Bank set out in June exactly how this feeds through. Holding the cash rate at 4.35 per cent on 16 June, the Monetary Policy Board said higher fuel prices "have added directly to inflation" and that pass-through to other goods and services meant inflation was "likely to remain high for some time". The board named the Middle East as the risk. It meets next on 11 August, and Westpac's economics team is already forecasting two more rate rises before any cut arrives in 2027.
Markets read Monday the same way. Gold, which usually rises on war risk, fell 2.55 per cent instead, and the S&P 500 lost 0.8 per cent, a session that looked less like fear of war and more like fear of interest rates.
The sequence from here is set by publication schedules. The ACCC's next weekly report is the first official reading of what Monday's barrel does to Australian pump prices, and the June-quarter CPI lands at the end of the month, two weeks before the Reserve Bank board sits. The last 16 cents at the bowser was tax. The next instalment is the barrel, converted at 69 cents.
