Australian Shares Cautious on Strait of Hormuz Oil Price Surge

Australian shares are set for a softer open on Friday after crude oil prices surged by more than $3 a barrel due to concerns over restrictions in the Strait of Hormuz.

The Strait is a critical chokepoint for global oil supply, and any hint of restrictions can lead to higher oil prices. This, in turn, can lift inflation readings and expectations, which could limit the Reserve Bank of Australia's (RBA) ability to signal dovish policy even if it keeps interest rates unchanged.

The RBA's upcoming rate decision next week will be closely watched as investors assess the impact of higher oil prices on the economy. Higher interest rates can raise the discount rate used to value future profits, which can trim support under broad indexes like Australia's benchmark S&P/ASX 200.