The Iran War Is Hitting Your Business. Here's Exactly What's Happening and What to Do.

If your operating costs have jumped in the last three months, this is why.

On 28 February 2026, the United States and Israel launched military strikes against Iran. What followed wasn't just a geopolitical event happening somewhere far away. It was the beginning of a supply shock that is hitting every Australian business paying for fuel, freight, food or finance.

Here is what's actually happening, what it means for your business right now, and what you can do about it.

What Is the Strait of Hormuz and Why Does It Matter to You?

The Strait of Hormuz is a 54-kilometre-wide shipping channel on Iran's southern border. Through it flows approximately 20% of the world's traded oil and 25% of global LNG — every single day.

When Iran closed it in response to the US-Israel strikes, it didn't just disrupt Middle Eastern oil. It disrupted the supply of refined fuel to Australia. We are one of the world's most fuel-import-dependent economies. Australia imports approximately 90% of its liquid fuel. Only two refineries still operate domestically — Ampol's Lytton in Brisbane and Viva Energy's Geelong facility — and together they cover less than 20% of national demand.

The rest comes from refining hubs in Singapore, South Korea and Malaysia. Those hubs depend on crude oil that moves through the Strait of Hormuz.

As of today, the Strait has been effectively closed for more than 75 days — the longest sustained closure in recorded history. The International Energy Agency has described this as the "largest supply disruption in the history of the global oil market" and the greatest energy security challenge in history.

That is not hyperbole. And it is landing directly on your bottom line.

How Much Has Fuel Actually Gone Up?

Before the war, Australians were paying around $1.65 per litre for unleaded petrol in Sydney. Diesel sat at roughly $1.90 per litre nationally.

By March 2026, the Australian Institute of Petroleum confirmed that national average petrol had reached 198 cents per litre — a 17-cent jump in a single week. Diesel wholesale prices peaked at over $3.20 per litre in early April.

The government responded by halving the fuel excise from 1 April, providing relief of around 26 cents per litre at the pump. That cut expires in June.

Where things stand now:

1. Petrol is at approximately $1.93/litre on average
2. Diesel remains at $2.75–$3.00+ per litre in most areas — up sharply from pre-war levels and far less affected by the excise cut
3. Jet fuel remains severely elevated, which is pushing up airfreight and travel costs across the supply chain

The simple reality: if your business runs vehicles, machinery, or relies on anything delivered by road, your cost base has materially changed.

What the Government Is Doing About It

The 2026 Federal Budget, handed down on 13 May, allocated a $10–14.8 billion fuel security and resilience package in response. Key measures include:

• $3.2–3.7 billion for a government-owned fuel reserve capable of holding 1 billion litres of diesel and aviation fuel
• $1 billion in interest-free loans for manufacturers and logistics businesses
• Fuel excise halved for three months from April 1 (cost: $2.9 billion) — not extended beyond June under current plans
• A 20% gas export reserve
• Diplomatic efforts to secure alternative supply from the US, Argentina, Algeria, South Korea, Brunei and Malaysia

Energy Minister Chris Bowen confirmed approximately 57 tankers carrying over 4 billion litres are en route or secured through May.

The government also warned — in the budget papers — of a "nightmare scenario" if the conflict escalates further: oil at US$200 a barrel, inflation surging to 7.25%, and Australia pushed to the brink of recession.

That isn't a prediction. It's a risk scenario that is on the table.

What This Is Doing to Australian Business

Transport and Logistics

This sector is absorbing the most direct impact. Diesel at $2.75–$3.00+ per litre fundamentally changes the economics of any business that moves goods by road. Freight operators are applying emergency fuel levies across the supply chain, and those costs are flowing through to every delivered product.

Smaller operators are in the hardest position: they face the full cost increase but have the least leverage to pass it on to customers quickly.

Agriculture

Australian farming operations consume approximately 800–900 million litres of diesel annually. The fuel shock is compounding a separate crisis: up to 30% of globally traded fertiliser transits the Strait of Hormuz. Urea prices have surged, threatening planting cycles. If these disruptions persist, analysts have warned of potential 50% food price increases flowing through to consumers over the next 12 months. IBTimes Australia has been tracking diesel shortages and their impact on food supply chains in detail.

Construction

The construction sector was already dealing with labour shortages and cost pressures before the fuel crisis. The Iran war has added emergency fuel levies, higher materials costs, and supply chain delays. Building costs are being reported as up 36% in some segments. For project-based businesses with fixed-price contracts, this is an existential problem.

Manufacturing

Higher input costs, higher freight costs, and a consumer base with less discretionary spending. The Times Australia reported a sharp drop in manufacturing revenue and profitability in the early months of the conflict for many operators.

Every Business with a Supply Chain

Fuel costs are embedded in the price of almost everything. When diesel goes up, so does the cost of delivering raw materials, finished goods, food and services. The flow-on inflation is not a one-time event — it works through the economy over months.

What This Means for Interest Rates and Your Borrowing Costs

This is where the Iran war connects directly to your cash flow.

Headline inflation reached 4.6% for the 12 months to March 2026 — well above the RBA's 2–3% target. AMP has forecast it will exceed 5% in the June quarter. Westpac's three-scenario modelling shows that a three-month Strait of Hormuz disruption could push CPI temporarily to 1.5 percentage points above where it otherwise would have been. Westpac IQ's detailed analysis covers all three scenarios and their GDP implications.

The RBA faces a difficult call: the inflation is largely supply-driven and external, not a result of domestic overheating. Raising rates to combat it risks crushing a weakening economy. Leaving rates steady risks letting inflation expectations become embedded.

As one widely-shared explanation on Reddit (r/AusFinance) put it: "War in Iran → Strait of Hormuz threatened → oil supply drops → oil price spikes → everything costs more → inflation rises → RBA raises rates → your mortgage goes up."

The RBA Governor described it in early March as "too early to know for sure." Given the IEA's assessment that the oil market will remain "severely undersupplied" until at least October 2026, certainty is not coming soon.

What this means practically: borrowing costs are at risk of moving in the wrong direction at the exact moment your operating costs are elevated.

How Long Will This Last?

Longer than most people expect.

A ceasefire between the US and Iran has been tentatively in place, but Trump himself described it as on "massive life support." Even if a durable peace agreement were reached tomorrow, the IEA's May 2026 report makes clear the market will remain severely undersupplied until at least October 2026. That's because:

• 15 years of Australian refinery closures mean supply chains cannot be rebuilt overnight
• Global oil inventories were depleted at a record pace during the crisis
• Iran's economy is in severe distress — 54% inflation, the rial having lost more than half its value — meaning even restored peace doesn't mean restored supply immediately
• The IEA's cumulative losses already exceed 1 billion barrels, a scale without historical precedent

Oxford Economics models a prolonged war scenario where world GDP slows to 1.4% and the Australian economy contracts in consecutive quarters. That's a technical recession.

The point is not to be alarmist. It is to be clear: this is not a three-week disruption that will be forgotten by June. Business planning needs to account for sustained elevated costs for at least the rest of 2026.

What You Can Do Right Now

Review your operating cost structure. Fuel costs that were manageable three months ago may now be material. If you haven't modelled the impact of diesel at $2.75–$3.00 on your margins, do it this week.

Revisit your pricing. If you've been absorbing cost increases rather than passing them through, you need to have that conversation with your customers. You are not alone in facing these pressures — most of your customers understand the environment.

Check your freight contracts. Many logistics agreements don't automatically include fuel escalation clauses. If yours don't, renegotiate or account for the gap in your cash flow forecasting.

Stockpile essentials where practical. If your business relies on diesel for machinery or generators, maintaining a higher-than-usual buffer while supply is available is prudent — not panic buying, but sensible forward planning.

Protect your cash flow. Higher costs hitting your P&L at the same time as potentially tighter credit conditions is a dangerous combination. Know your working capital position, know your facility limits, and act before you are under pressure rather than during it.

A Note on Working Capital

The single most common mistake businesses make in a cost shock like this one is waiting until they're already under pressure to look at their financing options.

If your cash flow is being squeezed by rising fuel, freight or materials costs, the time to explore your options is now — when you're still in a position of strength, not scrambling for emergency funding.

A well-structured small business loan or working capital facility can bridge the gap between higher input costs and your payment cycles, giving you the runway to trade through a difficult period without compromising your operations.

Broc Finance works with small and medium businesses across Australia to find the right business finance solution for how they actually operate. With access to 150+ lenders and over 15 years in SME finance, the team moves quickly — funding in as little as 24 hours for approved applications. Talk to a specialist before the pressure builds.

The Bigger Picture

The Iran war has exposed a structural vulnerability Australia has ignored for 15 years: the near-total dismantling of domestic fuel refining capacity in favour of a "just-in-time" import model. As The Conversation explains, Australia imports roughly 90% of its liquid fuel, and our emergency reserve has been non-compliant with IEA minimums since 2012.

The Australian government is now spending almost $15 billion to address a crisis that experts, including John Blackburn at ASPI, have been warning about since the closure of the last large domestic refineries. That conversation is finally happening. But in the meantime, Australian businesses are living with the consequences.

The ATO estimated $3.4 billion in super went unpaid in 2019-20. The fuel crisis is creating a similar type of quiet accumulation — businesses absorbing costs quarter by quarter, hoping conditions improve, without restructuring to reflect the new reality.

The businesses that navigate this well will be the ones that face it directly: updating their cost models, protecting their cash flow, and making decisions from a position of preparation rather than reaction.

The time to act is now. Not when the pressure is already on.