The Middle East conflict is causing huge disruptions to energy supplies, with knock-on effects reaching far beyond petrol prices.

While the initial US-Israeli strikes on Iran drew a muted response from global markets due to expectations it would be a short conflict, there are now questions over whether the US has a clean exit strategy that would guarantee a stable resumption of trade through the crucial strait of Hormuz.

Here are five ways the “largest supply disruption in history” in global oil markets is affecting Australia, from the cost of crucial imported goods to the purchasing decisions made by consumers.

Electrified sales

There was already a strong shift to electrified vehicles before the war on Iran disrupted energy markets, with new battery vehicles selling at nearly double the rate from a year ago, according to February automotive data.

James Voortman, chief executive of the Australian Automotive Dealer Association, says car yards have been selling even more EVs since petrol prices started to rise.

“Most of the dealers think they will have a very big March in terms of EV sales,” says Voortman.

He says the rise in petrol prices was enough to convince some prospective buyers to make a purchase decision. 

“There were a lot of fence-sitters who are now coming off the fence,” he says.

The Tesla Model Y and BYD Sealion 7 are the two strongest selling EVs in Australia. About one-third of new cars sold in Australia are now hybrids or EVs.

Mortgage pain

Given that oil prices are the single biggest contributor to global inflation – they add costs to almost all goods and services – interest rates are now expected to rise faster than previously forecast.

The ASX’s rate tracker indicates there is a 66% chance of a hike on Tuesday. A week ago, when it looked more likely that the Iran war would be short, the probability of a March increase was just 22%.

Australia’s big four banks all predict a rate rise on Tuesday, followed by another one in May.

If the bank forecasts prove correct, mortgage holders with an $800,000 debt will be paying $363 more in monthly repayments by May than they were at the start of the year, according to Canstar analysis.

Canstar’s data insights director, Sally Tindall, points out the longer-term rate outlook is unclear, given an escalation in the conflict could prove so damaging to the Australian economy that rates will need to eventually fall. 

“The cash rate could well rise in coming weeks, but the fallout from the war, if it hits the Australian economy and jobs market hard, could also push the RBA into reverting back to cuts in the not too distant future,” Tindall says.

Deliveries, flights and dining

Almost all forms of travel and freight are becoming more expensive, with costs ultimately passed on to consumers, affecting everything from air fares to parcel deliveries.

Customers are already seeing line items on their invoices noting additional charges.

Geelong-based D&D Worldwide Logistics says Australian businesses need to prepare for a new wave of freight cost increases.

“Road transport operators have confirmed fuel levy increases, and more carriers across ocean and air freight are expected to follow as global diesel and jet fuel prices continue to spike, driven directly by the ongoing Middle East conflict,” the logistics company says.

Cathay Pacific, AirAsia and Thai Airways have now joined Qantas, Air New Zealand and others in hiking air fares as travellers flock to stopover destinations in Asia, rather than the Middle East.

Jet fuel prices have now increased to levels not seen since early 2022 when Russia invaded Ukraine.

If the war is protracted, rising fuel and fertiliser costs will be passed on to consumers through higher food prices.

Australian farmers are facing soaring prices for the essential fertiliser ingredient urea, which has increased in price by more than 30% in the past month, according to commodities website Trading Economics.

The Middle East is a major urea producer and prices have spiked over the past two weeks.

The nitrogen fertiliser is used widely in Australia for vegetables, canola and cereal crops such as wheat and barley.

Plastic recycling

The cost of plastic is intrinsically linked to rising global crude prices, as the resins used to create packaging materials are oil derivatives.

Given that Australia imports over 90% of its plastic as either resins or finished packaging, a persistent disruption in the oil market will inevitably lead to manufacturers passing these higher input costs on to food producers and retailers.

According to Roelof Vogel, a circular economy researcher with experience in the global packaging industry, this market disruption could make recycled plastic a more appealing alternative for Australian businesses.

The industry now considers it to be prohibitively expensive, with the Australian council of recycling saying producing recycled plastic here can be 50% more expensive than imported virgin plastic.

“[If] there is a really sustained long-term increase where the price of oil does not come down for whatever reason, then all of a sudden recycled plastics start to look much more attractive and that the cost difference is no longer 50%,” Vogel says.

MRIs and helium balloons

Australia imports its helium, an industrial gas used to power MRI machines and other critical medical, research and manufacturing technology, including from Qatar.

The gulf nation produces roughly a third of the world’s helium, as a byproduct from liquefied natural gas. But Qatar has halted production after an Iranian strike on the Ras Laffan Industrial City – the gas hub where the country’s helium facilities are located.

Qatar’s state-run energy firm has reportedly halted liquefied natural gas production after the Iranian attacks. The government has said it is not aware of any immediate risk to helium supply or availability in Australia but will monitor for any potential supply chain disruption.

Australian party-goers not being able to blow up balloons would be the least concerning issue arising from a shortage of helium, says Prof Dongke Zhang, the director of the University of Western Australia’s Centre for Energy.

“Hospitals, across the nation, literally all of them use it to service MRI and other advanced diagnoses, and for running major research facilities in physics, in chemistry and, in my case, advanced energy technology,” he says.

Australia’s only helium plant, based in Darwin, closed in 2023. A new company, Natural Helium Tasmania, was recently granted exploration licences and expects to be operating in 18 months’ time.

“Balloons are the crudest and rudest form of helium,” says the company’s commercial executive, Simon Talbot. “[It’s in] literally every part of your day: when you pick up your phone, helium’s been used in your phone manufacturing.”