As the world waits to see if Iran will retaliate against US strikes on its nuclear facilities, concern is growing its next move may send oil and petrol prices soaring around the world.
The Iranian parliament has reportedly voted to block the Strait of Hormuz, with a final decision to cut off the crucial choke point for oil shipping now resting with Iran’s leaders.
Here’s how a blockade would impact Australian oil supply and what we could expect to pay at the bowser.
What is the Strait of Hormuz?
The Strait of Hormuz is a narrow stretch of water and the world’s most important oil transit choke point.
It’s the only marine entryway into the Persian Gulf. Iran occupies its northern shore, with Oman and the United Arab Emirates to the south.
At its narrowest point, it is approximately:
- twice the distance between Perth and Rottnest Island,
- the length of North Stradbroke Island,
- the distance between Sydney CBD and the Blue Mountains, and
- narrower than the width of Port Phillip Bay.
During the Iran-Iraq conflict between 1980-1988, both countries targeted commercial vessels in the Persian Gulf, but Hormuz was never completely closed.
Why is it important?
The Strait of Hormuz is crucial for global oil supply.
Roughly 20 per cent of the world’s oil consumption — 20 million barrels per day — and 25 per cent of global liquefied natural gas trade flows through there every day.
Between the start of 2022 and May 2025, somewhere between 17.8 million and 20.8 million barrels of crude, condensate and fuels flowed through the strait daily, data from analytics firm Vortexa shows.
Some of the world’s most important oil producers, including Saudi Arabia, Iraq, Iran, Qatar and the United Arab Emirates, export all of their oil in tankers through the strait.
Speaking with ABC NewsRadio, independent economist Saul Eslake said although Iran’s plans for the waterway remained unclear, a disruption could have global ramifications.
“If Iran were to block the Strait of Hormuz or indeed make credible threats to block it, it could act as a deterrent if not a formidable obstacle to getting a significant proportion of the world’s oil from where it’s produced to where it’s needed,” Mr Eslake said.
Ships with the US Fifth Fleet, along with other Western navies, patrol the region at all times. (US 5th Fleet via Reuters)
Who controls the Strait of Hormuz?
Iran does not exclusively control the strait.
While it borders the northern side and controls some islands within it, the strait is also bordered by Oman and the United Arab Emirates on the southern side.
Any attempts to bar passage through the strait would likely be met with a strong response.
Ships with the US Fifth Fleet, along with other Western navies, patrol the region at all times.
According to Iranian state media, Iran’s Supreme National Security Council will make the final decision on whether to close the strait after parliament reportedly approved the measure.
We haven’t got that outcome yet.
Member of parliament and Revolutionary Guard Commander Esmail Kosari told the Young Journalist Club that closing the strait was on the agenda and “will be done whenever necessary”.
US Vice-President JD Vance said closing the channel would be economically “suicidal” for the Iranian government.
“Their entire economy runs through the Strait of Hormuz. If they want to destroy their own economy and cause disruptions in the world, I think that would be their decision,” he told NBC.
“But why would they do that? I don’t think it makes any sense.”
Where does Australia get its oil?
Australia imports the equivalent of about 90 per cent of its refined oil needs.
This includes finished products such as bowser fuel.
According to the NRMA, Australia’s biggest sources of refined products are Korea, Singapore, Malaysia, Taiwan and Brunei.
Where do they get their oil? Most of them get it mainly from the Middle East.
According to the US Energy Information Administration (EIA), 84 per cent of crude oil that moved through the strait in 2024 went to Asian markets.
They include China, India, Japan and South Korea. Australia relies on all four of these countries for refined oil (see table above).
This is where current geopolitical tensions come into play.
A blockage of the Strait of Hormuz could see a spike in oil prices flow directly to the pump, but experts say prices are unlikely to rise in the same manner as they did in the wake of the Russia-Ukraine conflict in early 2022.
Will petrol prices rise?
Most likely.
NRMA spokesperson Peter Khoury says there’s “absolutely no doubt” that if Iran attempts to close the strait, it will have a “significant effect on prices”.
“Every time the Middle East sneezes, the rest of the world catches a cold, so we would expect to see significant increases in all oil prices,”
Mr Khoury said.
Since the war started over a week ago, the terminal oil gate price in Australia increased by about 8 cents per litre.
Peter Khoury says there’s “no doubt” motorists will see prices rise at the petrol pump. (ABC News: Marcus Stimson)
Mr Khoury expects this to be gradually passed on to motorists across the country.
“What it means for the capital cities that are currently experiencing a fall in petrol prices, is that they won’t likely fall as far, or for as long as we thought they would.”
If the strait is shut down, Mr Eslake wouldn’t be surprised if petrol prices surpassed $2.30 per litre.
“If the trading price went to $US100 a barrel, and remember this is also dependent on what the Australian dollar does against the US dollar, regular petrol could go well to $2.30–$2.50 a litre.“
But Mr Khoury and Australasian Convenience and Petroleum Marketers Association CEO Mark McKenzie agree that prices likely won’t rise in the same manner as after Russia invaded Ukraine.
“The current trading price this morning, $US78 barrel, is still below the oil price this time last year, and well below the price when the Russia-Ukraine conflict broke out in early March 2022 at $US128 barrel,” Mr McKenzie said.
“In fact, just six weeks ago, much of the media was correctly reporting that global oil prices had fallen to the lowest level in more than four years.
“The clear message here is that oil trading markets are learning to cope with the rising level of geopolitical uncertainty which is giving increasing price volatility.”
Experts say fuel prices could rise up to $2.50 a litre if Iran blocks the Strait of Hormuz. (ABC News: Jessica Hayes)
When could they rise?
Possibly mid-August.
But Mr McKenzie says this is only if the oil price climbs sharply. Currently, it’s risen by around 10 per cent.
“This higher-priced oil has to be refined and then shipped to global markets, which usually takes around two weeks.
“So, in effect, the price impact could be felt from mid-August.”
