Australian Fuel Prices Skyrocket Amid Iran Conflict

Australian gasoline prices surged last week by the most since the height of the US-Iran war following the collapse of a ceasefire between Washington and Tehran. The increase in fuel costs suggests persistent inflationary pressures ahead.

The average price of petrol jumped to A$1.82 ($1.27) per liter, with the weekly rise being the biggest since March 29, according to data from the Australian Institute of Petroleum. Meanwhile, diesel prices reached almost A$2.20 a liter.

Australia's center-left government has implemented temporary fuel tax cuts to shield motorists, farmers, and miners from the impact of the Middle East energy shock. However, with the resumption of fighting in Iran and ships traversing Hormuz declining, prices are increasing again.

The Reserve Bank of Australia highlighted the risks from increasing fuel costs in its latest quarterly update of economic forecasts. It noted that higher fuel prices can influence short-term inflation expectations, as changes in fuel prices can affect households' inflation expectations more than might be expected given their share in overall consumption.