Oil could top $US100 a barrel: How Iran conflict could curb Aussie spending

A spiralling Middle East conflict could lift petrol prices for Australian motorists, as US warships patrolled the Arabian Sea on Thursday ready to attack Iran unless it commits to giving up nuclear weapons.

The escalating regional tensions pushed the oil price to its biggest one-day rise since June last year, with Brent Crude futures 3.8 per cent higher to $US70.27 a barrel, and US WTI oil futures surging 4.2 per cent to $US65.03 a barrel.

On the S&P/ASX 200 Index, energy majors Woodside Energy and Santos Ltd jumped 2.4 per cent and 3.2 per cent in response to the soaring oil prices, while junior producer Karoon Energy leaped 4.5 per cent to $1.60.

AMP chief economist Shane Oliver warned prices of the world’s dominant energy source could easily top $US100 a barrel in the worst case scenario of a US attack that spiralled into a regional war and forced the closure of key oil-shipping passage the Strait of Hormuz.

“Each $US10 a barrel the oil price rises adds roughly 10 cents a litre to petrol prices in Australia,” said Dr Oliver.

“So, if we went from $US65 to $100 you’re potentially adding 30 or 40 cents a litre, which would add to inflation. But rising prices would also act like a tax on consumer spending to dampen things in the economy at the same time as the RBA would look through the rise as temporary.”

Geneva negotiations

Oil’s latest leg higher came after US Vice-President JD Vance warned little progress was made during talks between Iran and the US in reaching a nuclear deal in Geneva, Switzerland, on Wednesday.

“Vance noted certain US ‘red lines’ that Iran is so far unwilling to address and while both sides continue the diplomacy to work through those issues, the Vice-President reminded that ultimately it will be up to President Trump to decide whether such diplomacy had run its course,” said National Australia Bank markets strategist Gavin Friend.

“That tacit threat, with a heavy US military presence in the region appears to be keeping tensions in oil markets raised.”

The erratic foreign policy making of President Donald Trump means global investors remain uncertain about the likelihood of war, even as the US President ordered naval Carrier Strike Group, USS Gerald R Ford, to join Strike Group, USS Abraham Lincoln, in the Arabian Sea this week.

The last time the US sent two naval carrier strike groups to the Middle East was during Operation Midnight Hammer last June, when it bombed Iran’s nuclear plants.

Oil traders hedging bets

Dr Oliver said this week’s oil price suggests traders are hedging their bets over the chances of a conflict, with Brent Crude rising 14 per cent from $US60.24 a barrel at the start of 2026, to $US70.27 on Thursday.

“So some of the risk of conflict is already priced in,” said Dr Oliver.

“But, if Iran was attacked we’d see a spike in prices as the market awaited Iran’s response. Right now, it’s really just a day-to-day focus on the US military build-up and people watching any progress on settlement talks.”

In June 2025, during the 12-day war between Iran and Israel, Brent Crude prices peaked around $US80 a barrel on June 23, still some 14 per cent above Thursday’s level.

NAB’s strategist Mr Friend suggested Iran may be given a “week or two” by the US to make concessions from the Geneva talks, with the key sticking point being a preparedness to completely surrender its nuclear ambitions.

Elsewhere in Geneva this week, Russian and Ukrainian government officials abruptly ended talks to put an end to the four-year war in Ukraine. The last time oil prices topped $US100 a barrel was months after that conflicted started, when Russia invaded Ukraine in February 2022.

“Meanwhile there was also no discernible progress in Russia-Ukraine talks, also in Geneva, where discussions were described as short but business like,” said Mr Friend.

“President Trump urged Ukraine to ‘get to the negotiation table fast’, but (Ukraine’s) President Zelenskyy argued it’s unfair that Russia is not being pressured.”