RBA Warns Oil Prices Could Rise Higher Amid Ongoing US-Iran Conflict

The Reserve Bank of Australia (RBA) is warning that oil prices could rise even higher due to the ongoing conflict between the US and Iran, putting pressure on inflation.

RBA governor Michele Bullock said in a speech on Tuesday that underlying inflation had evolved broadly as expected since May but was still too high. The Middle East oil crisis is pushing prices up, with global benchmark Brent crude falling back below $US90 a barrel on Tuesday after briefly reaching above $US100.

The Treasury warned at the weekend that the recent re-escalation in the conflict means oil prices are likely to stay elevated in the short term. The breakdown of a memorandum of understanding between the two sides shows the underlying dispute over control of the Strait of Hormuz remains unresolved, leaving the market exposed to repeated cycles of escalation and de-escalation.

Bullock said that further easing in demand was needed to bring inflation sustainably back to target. 'A key question in the period ahead is whether the tightening in monetary policy earlier in the year is sufficient to achieve this,' she said.