As the world watches to see if Iran will retaliate against US strikes on its nuclear facilities, fears are mounting that any response could trigger a surge in global oil and fuel prices.
Reports indicate Iran’s parliament has voted in favor of closing the Strait of Hormuz, with the ultimate decision now resting with the country’s leadership.
Here’s what a potential blockade could mean for Australia’s oil supply and fuel prices.
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What is the Strait of Hormuz?
The Strait of Hormuz is a narrow and critical passage for global oil transportation, serving as the sole maritime route into the Persian Gulf. Iran borders the northern shore, while Oman and the United Arab Emirates lie to the south.
At its tightest point, the strait’s width can be compared to:
- Twice the distance between Perth and Rottnest Island
- The length of North Stradbroke Island
- The distance from Sydney CBD to the Blue Mountains
- Narrower than Port Phillip Bay
During the Iran-Iraq war (1980–1988), both sides targeted vessels in the Persian Gulf, but the Strait itself was never completely shut.
Why is it important?
The Strait of Hormuz is vital to the global oil market. Roughly 20% of the world’s oil consumption — around 20 million barrels daily — and a quarter of the global liquefied natural gas trade pass through the strait.
Data from Vortexa shows that between early 2022 and May 2025, 17.8 to 20.8 million barrels of crude oil, condensate, and fuel traversed the strait each day.
Major producers like Saudi Arabia, Iraq, Iran, Qatar, and the UAE rely on this route for oil exports.
Speaking to ABC NewsRadio, independent economist Saul Eslake warned that any Iranian move to close or threaten closure of the strait could severely disrupt global oil supply.
“If Iran were to block or credibly threaten to block the Strait of Hormuz, it would become a serious obstacle to moving oil from producers to global markets,” Eslake said.
Who controls the Strait of Hormuz?
Iran doesn’t have exclusive control over the strait. While it commands the northern side and some islands, Oman and the UAE share control of the southern portion.
Any attempt to block passage would likely provoke an international military response. US Fifth Fleet ships, along with other Western naval forces, constantly patrol the region.
According to Iranian state media, Iran’s Supreme National Security Council will make the final decision on the strait’s closure, following parliamentary approval.
Statements from Iranian and US Officials
Revolutionary Guard Commander and lawmaker Esmail Kosari told the Young Journalist Club that closing the Strait is “on the agenda” and will be done “whenever necessary.”
US Vice-President JD Vance called such a move economically “suicidal” for Iran, warning that their economy heavily depends on the strait’s continued operation.
Where does Australia get its oil?
Australia imports approximately 90% of its refined fuel needs, sourcing finished products from nations like Korea, Singapore, Malaysia, Taiwan, and Brunei — many of which, in turn, source crude oil from the Middle East.
According to the US Energy Information Administration, 84% of crude oil that passed through the Strait of Hormuz in 2024 went to Asian markets including China, India, Japan, and South Korea — all key suppliers of refined fuel to Australia.
Thus, any disruption in the Strait could lead to increased fuel prices in Australia, though experts believe the impact may not mirror the sharp increases seen after Russia’s invasion of Ukraine in 2022.
Will petrol prices rise?
Most likely, yes.
NRMA spokesperson Peter Khoury stated there’s “absolutely no doubt” that any attempt by Iran to close the Strait would significantly impact prices.
“Whenever instability strikes the Middle East, the rest of the world feels it. We can expect substantial increases in oil prices,” Khoury said.
Since the conflict began over a week ago, Australia’s terminal oil gate price has already risen by around 8 cents per litre. Khoury expects these increases to gradually reach motorists.
In capital cities where petrol prices are currently falling, Khoury noted they may not drop as far or for as long as previously anticipated.
Economist Saul Eslake added that if oil prices reached US$100 a barrel — depending also on exchange rates — petrol could rise to between $2.30 and $2.50 per litre.
However, both Khoury and Mark McKenzie, CEO of the Australasian Convenience and Petroleum Marketers Association, believe the increases may not match the sharp spikes seen during the Russia-Ukraine war.
McKenzie noted that despite recent gains, current oil prices are still well below those seen in early 2022. In March 2022, prices hit US$128 per barrel, compared to around US$78 per barrel now.
“The oil market is adapting to geopolitical risks, which results in higher price volatility but not necessarily the same extreme price levels we’ve seen in past crises,” McKenzie said.
When might prices increase?
Potentially by mid-August, if oil prices rise sharply.
McKenzie explained that higher oil prices need to work through the supply chain — from refining to shipping — which typically takes about two weeks, meaning any price hikes could start affecting consumers by mid-August.
