Crude oil prices rise again to $US120 a barrel as traders lose hope over prospect of US peace with Iran

Australian motorists face higher fuel prices again that would wipe out the benefits of a temporary tax halving after crude oil prices soared to $US120 a barrel, sparking a Federal Government warning about surging construction costs.

The spot price of Brent crude is back to levels last seen in 2022, following Russia’s Ukraine invasion, after traders lost hope that US President Donald Trump would be able to reach a peace agreement with Iran, as the war enters its third month.

“It’s the removal of the assumption that there will be a quick fix in the Middle East,” Moomoo chief executive and strategist Michael McCarthy told The Nightly.

“The markets, from the get-go, have assumed that this would be over very quickly and now that we’re sort of hitting the third month of this conflict, oil traders have had to recognise reality that disruption to supply is now being compounded by the fact that many oil-producing nations in the Middle East have reached the limits of their storage capacity so they’re going to have to start shutting down production.”

The two per cent surge in crude oil prices, during Wednesday night trade, is occurring four weeks after the Federal Government halved fuel excise to 26.3 cents a litre until the end of June.

While wholesale and retail prices for diesel and unleaded have fallen, Mr McCarthy said the soaring of crude oil prices again was likely to see fuel prices go above where they were in late March before the tax relief came into effect.

This would see diesel prices rise above $3.20 a litre on average, up from less than $2.50 a litre now, as unleaded prices hit $2.60 a litre, up from $1.90 a litre with the fuel tax relief.

“It seems very, very likely. In fact, it’s very likely the increase in petrol prices by the time this crisis is over will be far exceeding any reduction in the excise,” he said.

Treasurer Jim Chalmers seized on the higher crude oil prices to argue this will push up the price of home construction, with crude oil from the Middle East needed for the likes of PVC and polyethylene piping.

“We’ve had some cost pressures in construction already, the war in the Middle East will make that much worse,” he told ABC News Breakfast on Thursday.

“It will make it harder and more expensive to build the homes that we desperately need in our local communities like this one.”

The Federal Government is talking down its housing targets after its own National Housing Supply and Affordability Council predicted the Middle East conflict would challenge the National Housing Accord goal of building 1.2 million homes over the five years to mid-2029.

“At the time of writing this report, there is significant uncertainty in the scale and length of the conflict,” it said in its State of the Housing System report for 2026.

“In this context, the report illustrates the potential impact of the Middle East conflict on housing construction costs and, in turn, housing supply.

“The conflict in the Middle East is now leading to higher fuel and petrochemical prices, which are flowing through to higher transport and material costs, and also affecting product availability.”

The council predicted a 6 per cent increase in construction costs by mid-2026 would mean 10,000 fewer dwelling completions by mid-2029.

But a 10 per cent increase in construction costs would mean 33,000 fewer completions by that time.

In early 2026, before the US airstrikes on Iran, the council estimated 980,000 new homes would be built in the accord period.

While below target, that was 42,000 better than expected in May 2025.

Housing Minister Clare O’Neil said the Middle East conflict was challenging the building sector, with Labor last year pausing changes to the National Construction Code, covering things like energy efficiency and water proofing, until mid-2029.

“Higher costs. Supply chain pressures. Real impacts here at home,” she told the Property Council’s National Housing Solutions Summit in Melbourne on Thursday.

“Every step we take to lift productivity in the building sector strengthens our resilience in the face of supply chain challenges.”

Before the Middle East oil crisis, Labor’s National Housing Accord was 97,408 homes behind schedule with 262,592 completions between July 2024 and December 2025, instead of 360,000, Australian Bureau of Statistics data from this month showed.

The National Housing Supply and Affordability Council said September 2030 was a more realistic goal for the housing accord target.