Middle East crisis sends fuel prices soaring

Escalating violence between Israel and Iran over nuclear warhead fears is about to hit Aussies everywhere from the bowser to the supermarket.

Petrol prices in Australia could skyrocket by up to 12 cents a litre following Israel’s announcement it had launched strikes on “dozens” of military targets in Iran.

Israel Prime Minister Benjamin Netanyahu said the Friday attacks were a response to Tehran’s building of nuclear warheads and the operation would continue “for as many days as it takes to remove this threat”.

“We struck at the heart of Iran’s nuclear enrichment program,” Mr Netanyahu said during a live address.

Israel's Prime Minister Benjamin Netanyahu announced the attacks in a live address.

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“We struck at the heart of Iran’s nuclear weaponisation program. We targeted Iran’s main enrichment facility in Natanz. We targeted Iran’s leading nuclear scientists working on the Iranian bomb. We also struck at the heart of Iran’s ballistic missile program.”

Global markets were quick to react to Mr Netanyahu’s announcement, with oil prices surging in the wake of the strikes.

Crude oil prices rose 10 per cent amid concern from traders that ongoing conflict between Israel and Iran could disrupt global supplies.

Oil costs have immense flow-on effects to other markets that rely on fuel to ship their products.

Global oil prices surged following Israel's strikes on Iran. Picture: AMP

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In Australia, that impact could exacerbate an already strained cost of living crisis, with supermarkets passing on increased petrol costs for truck movements to Aussie consumers.

AMP chief economist Shane Oliver said the oil price spike caused by the Israel-Iran conflict will equate to higher petrol prices.

He said Australians could be looking a 12-cent hike to petrol prices if the increase to global markets continues.

“Much will depend on Iran’s retaliation and whether it returns to US nuke talks, which Israel may be trying to force,” Mr Oliver said.

Mr Oliver’s prediction backs those of global analysts who said all eyes would be on Iran’s next move in the escalating conflict.

Firefighters and people clean up the scene of an explosion in a residence compound after Israel attacked Iran's capital Tehran. Picture: AP Photo/Vahid Salemi

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“It’s an explosive situation, albeit one that could be defused quickly as we saw in April and October last year, when Israel and Iran struck each other directly,” Vandana Hari of Vandana Insights told the BBC.

“It could also spiral out into a bigger war that disrupts Mideast oil supply.

A worst-case scenario for global oil supply could see Iran disrupt shipping infrastructure in the Strait of Hormuz where millions of barrels are moved per day.

The strait is one of the world’s most important shipping routes, accounting for a huge 20 per cent of the global oil supply.

The Strait of Hormuz connects The Gulf with the Arabian Sea and is bordered by Iran to the north and Oman and the United Arab Emirates in the south.

Originally published as Middle East crisis sends fuel prices soaring