Donald Trump’s attempt to overthrow the Iranian government by force could trigger a new wave of cost-of-living pressures that embattled governments and central banks around the world will struggle to deal with.

The US-Israel attack on the Middle Eastern country at the weekend is the latest in a long series of global economic shocks.

Shipping through the strait of Hormuz, a narrow channel on Iran’s southern border that connects the Persian Gulf with the Gulf of Oman, effectively closed in the wake of the missile attacks as companies swiftly moved to restrict transport.

The strait is a key shipping route. Not only does a fifth of the global seaborne oil pass through it, so does a fifth of worldwide LNG shipments and about a third of global trade in urea – the most widely used fertiliser.

“Of all the possible Middle East scenarios, the current state of play is one of the worst for the global economy,” says the Commonwealth Bank of Australia’s head of global economics, Joseph Capurso.

He added: “We expect the situation to escalate before it de-escalates.

“Iran’s leadership and military capabilities have been significantly degraded. However, what is unknown is their intent and capability to block the strait of Hormuz that would sharply push up oil and gas prices.”

However, investors have so far remained relatively sanguine about other potential knock-on effects, reflecting a broad opinion that the disruptions to oil supplies will follow the script of recent years and prove short-lived.

The international oil benchmark, Brent crude, jumped by as much as 13% to reach $US81.57 a barrel on Monday morning – the highest in more than a year – before easing to just shy of $US77.53 by the afternoon to be up 6.4% on last week.

Asian sharemarkets also recovered from steep early losses but still traded 1.5% down, while Australian stocks finished Monday’s session marginally higher as traders jumped into goldminers and LNG exporters.

Despite expectations of further bombing over the coming days, investors seemed reassured by Trump’s comments that he would be prepared to drop sanctions on Iran if the country’s new leadership proved to be “pragmatic”.

Still, experts remain alive to worse case scenarios, including a complete closure of the shipping route.

Analysts at UBS told clients on Monday: “While a full physical closure of Hormuz would be challenging, Iran could attempt to disrupt traffic and push shipping companies and insurers to avoid the crossing.

“We could be looking at a material disruption, potentially of a greater magnitude than the recent loss of Russian supply in 2022, which sent spot prices to [over] US$120/bbl.”

However, they noted that Iran’s economy is overwhelmingly dependent on petrodollars, so “as long as Iranian oil exports are still flowing, the likelihood of closure and/or strikes on regional energy infrastructure may be lower, in our view, except as a last resort”.

Higher petrol prices

Johnathan McMenamin, the head of economic forecasts at investment bank Barrenjoey, said rising oil prices would have the most direct impact on real economic activity.

“It is generally stagflationary. It increases inflation directly through high bowser prices, but it can spill over into broader prices. At the same time, it tends to reduce growth through a reduction in the people’s ability to spend,” McMenamin said.

Australian households can expect to see the consequences of the attack on Iran at the bowser.

Shane Oliver, the chief economist at AMP, said his rough rule of thumb was that each US$1 rise in global oil prices adds 1 cent to a litre of petrol.

So in a worst-case scenario, such as if the global oil price benchmark were to climb above US$100 a barrel over coming days, unleaded fuel could jump by 40 cents or more to $2.20-2.40 per litre in the major cities.

The Reserve Bank, which is widely anticipated to hike rates for a second time this year in May, will need to both balance a further increase to inflation and be wary of “what happened post the Ukraine war” when global energy prices sent consumer prices soaring, McMenamin said.

“At the same time, they will want to act slowly and cautiously to ensure they don’t do any further damage to growth.”

Regional insecurity

Australia is a net exporter of energy, thanks to its huge LNG and thermal coal sales, but that is a rare position across the Asia-Pacific region.

Richard Yetsenga, ANZ’s chief economist, said that with the exception of Malaysia, Asian countries import more oil than they export.

Japan, South Korea, Taiwan, Singapore and Hong Kong import more than 80% of the energy they consume domestically, according to Moody’s Analytics.

“The reality is that this is a broader shock to the region; if higher oil prices are sustained, it is a loss of national income for these countries,” Yetsenga said.

He said higher oil prices were “not too damaging” economically, but higher energy costs could reignite political pressures.

“Asia has cost-of-living issues like the rest of the world because of the shift in price levels over the tail-end of the pandemic.

“China is struggling with soft consumption, so an increase in energy prices won’t be particularly welcome.

“So an increase in oil prices, coupled with weaker local currencies, would still mean that governments take steps to mitigate the impact on households.”

That is already evident in Thailand, where the government at the weekend instituted an immediate ban on all petroleum exports and announced it would draw on a national fuel fund to protect motorists from climbing petrol prices, according to local media.

“There are obviously a range of potential outcomes and we shouldn’t lose sight of the terrible human cost of another military conflict,” Yetsengas said.

“But the global economy has shown itself exceedingly resilient to the numerous shocks in recent years, and there’s no reason to think this will be any different.”

Chinese refiners buy almost all of the 1.6m barrels of crude oil that Iran exports every day – equivalent to about 13% of China’s total seaborne oil imports, according to TD Securities.

Iran continued to load oil tankers over the weekend, the Wall Street Journal reported, in an early sign that the country will continue to ship crude even as other shipping grinds to a halt.

China condemns US attacks

With the confirmed death of Iran’s supreme leader, Ali Khamenei, at the weekend, Chinese foreign minister Wang Yi slammed the strikes, saying it was “unacceptable to openly kill the leader of a sovereign country and institute regime change”.

The strikes may also damage a fragile trade truce between China and US, and complicate negotiations ahead of a meeting between Trump and Xi Jinping in Beijing later this month.

With a fifth of the global gas supply also passing through the strait of Hormuz, an extended conflict that chokes off shipping also risks unleashing a new wave of energy chaos in Europe, where energy inventories are already low, according to Citi analysts.

European wholesale gas prices could triple to US$100 per megawatt hour were the strait to close entirely for three months, or operate at half capacity for six months.

That would still be well short of the more than US$300/MWh peak that followed Russia’s invasion of Ukraine in 2022.

But analysts warned that if an extended Middle East war were to close shipping in the region, prices “could potentially escalate non-linearly, similar to what happened in late 2021 and 2022”.

“Very high TTF [European wholesale gas] prices would have inflation implications especially for Europe, as seen in 2022,” they said.

• Patrick Commins is Guardian Australia’s economics editor