SYDNEY — Australian motorists are bracing for another sharp rise in petrol prices as the ongoing US-Iran conflict and effective closure of the Strait of Hormuz threaten to send global oil benchmarks well above $100 a barrel, with some economists warning that unleaded fuel at the pump could exceed $3.00 a litre if disruptions persist into the second quarter of 2026.

The national average price for regular unleaded petrol climbed to around 229.6 cents per litre in mid-March, up more than 84 cents from February lows in major cities and even higher in regional areas. In Western Australia, prices surged roughly 70 cents a litre in less than a month, reaching near $2.26 in Perth. Industry observers say the latest increases reflect a 31.8% jump in unleaded 95 between late February and mid-March — the fastest rise among developed nations since the conflict began.

The catalyst is clear: the Strait of Hormuz, the narrow waterway between Iran and Oman through which roughly 20% of global seaborne oil and significant LNG volumes pass daily. Since US and Israeli strikes on Iranian targets in late February, Iran has restricted shipping, planted mines and deployed drones and speedboats, slashing traffic to a fraction of normal levels. Only limited vessels, often carrying Iranian oil or those from “friendly” nations, continue to transit, while most international tankers have diverted or delayed voyages.

Brent crude, the global benchmark, traded around $102 per barrel on Tuesday, March 24, 2026, after volatile swings that saw it briefly exceed $114 and touch highs near $119 in recent weeks. West Texas Intermediate has followed a similar path, remaining well above $90. Analysts at Goldman Sachs and others have embedded a substantial geopolitical risk premium in current prices, with some forecasting averages of $110 or more through the second quarter if the strait remains contested.

Australia imports nearly all its refined petroleum products, making it highly vulnerable to international crude price spikes. Although the country holds strategic fuel reserves equivalent to roughly 36 days of petrol, 32 days of diesel and 29 days of jet fuel, these stocks provide only a short buffer. The federal government has stated that physical shortages are unlikely if the disruption resolves within six months and International Energy Agency members release emergency stocks, but prices at the pump respond almost immediately to wholesale movements.

Every $1 increase in the price of a barrel of oil typically adds about 1 cent per litre to Australian retail petrol, though the relationship is not perfectly linear. Refinery margins, shipping costs, the Australian dollar’s value and local competition among fuel retailers also play roles. In the current environment, banks such as Westpac have modelled scenarios in which retail unleaded could average $2.02 a litre and diesel $2.50 if oil settles near $90–$110. More severe three-month disruptions could push oil toward $185 a barrel in extreme forecasts, translating to increases of up to $1.00 a litre or more at the bowser.

The pain is already evident. Panic buying has been reported in some areas, and farmers in regional Australia face higher diesel costs that flow through to food prices and agricultural operations. Transport operators and logistics firms warn of broader cost pressures that could feed into inflation and slow economic growth. The Reserve Bank of Australia is closely watching fuel costs as it weighs further monetary policy decisions, with some economists suggesting the latest surge could delay expected rate cuts.

Why the Strait of Hormuz matters so much cannot be overstated. Roughly 20 million barrels of oil move through the passage each day under normal conditions, destined largely for Asia but influencing global pricing everywhere. Limited bypass pipelines in Saudi Arabia and the United Arab Emirates can reroute only a few million barrels daily at most. With Iranian production also curtailed and OPEC+ spare capacity difficult to access while the waterway is contested, the market faces a genuine supply shock.

President Donald Trump has issued ultimatums to reopen the strait, threatening strikes on Iranian power infrastructure and offering political risk insurance for shipping, while extending deadlines amid reported diplomatic talks. Iran denies formal closure but maintains that risks to vessels remain high. Limited traffic has resumed in recent days, contributing to some price pullbacks, yet analysts caution that any sustained reduction in flows would keep upward pressure on energy costs.

For Australian households already grappling with cost-of-living pressures, the timing is particularly difficult. Petrol prices had eased earlier in 2026 but reversed sharply after the conflict escalated. In Sydney, Melbourne and Brisbane, metropolitan averages have climbed above $2.00 a litre in many outlets, with regional motorists paying even more. The Australian Automobile Association and NRMA have urged drivers to shop around using fuel apps and consider smaller fills, while calling on retailers to pass on wholesale relief quickly when it materialises.

Longer-term risks extend beyond the immediate crisis. A prolonged Hormuz disruption could reshape global energy markets, accelerate shifts toward renewables and LNG alternatives, and force Australia to rethink its fuel security. The country has no domestic crude production at scale and relies on imports refined overseas or at its remaining refineries. Government reviews have previously concluded that paying premium prices would secure supply even in extended crises, but that offers little comfort at the pump.

Some relief may come if diplomatic efforts succeed or if US naval escorts and allied operations restore safer passage. Maritime security experts suggest Iran’s capacity to sustain attacks may diminish over weeks as its missile and drone stocks deplete. Trump has described the conflict as nearing completion, though Tehran maintains a hard line. Markets remain jittery, with options pricing reflecting expectations of continued volatility.

Economists at Westpac, CommBank and others have outlined tiered scenarios: a short Iranian production-only hit might add 25 US cents a barrel and 25 Australian cents a litre at the pump; a one-month Hormuz disruption could lift oil by $25–$40 and petrol by 50 cents or more; a three-month event risks far steeper increases. The Australian dollar’s weakness against the US dollar amplifies the local impact, as oil is priced in greenbacks.

For now, the message from fuel industry bodies is cautious optimism mixed with realism. Wholesale prices have shown some softening in recent sessions as vessels trickle through the strait, but any renewed escalation could erase those gains overnight. Motorists are advised to monitor FuelWatch and similar services, fill up strategically and consider fuel-efficient driving habits.

The current gas price shock serves as a stark reminder of Australia’s exposure to distant geopolitical events. While the nation’s strategic reserves and diversified import sources provide a safety net against outright shortages, they do little to shield household budgets from the rapid transmission of global oil prices to the local bowser.

As negotiations continue and military posturing persists, Australian drivers may soon face the prospect of $3.00 petrol — a threshold once unthinkable but now squarely within range if the world’s most critical energy chokepoint remains contested. How long the pain lasts will depend on diplomacy, military developments and the resilience of global supply chains in the weeks and months ahead.