Australia On The Edge
The escalating conflict between US-Israel and Iran is breeding uncertainty about how Australia will be impacted.
There are dire concerns for the global fuel supply with Iran’s blockade of the Strait of Hormuz, a vital passage for oil transport that has been brought to a standstill. Oil tankers and fuel facilities have been set ablaze in a series of attacks as Iran seeks to put a stranglehold on global oil trade.
Iran’s military has stated that any ships belonging to the US, Israel, or its allies will be considered ‘legitimate targets’. The price of oil has skyrocketed, with Iran warning it could exceed $200/barrel.
This has already had a major impact on fuel prices in Australia, pushing them beyond $2/litre and causing panic buying. Consumers are being urged to refrain from hoarding fuel, with some petrol stations in regional areas already tapped dry and buying limits being enforced.
We saw the effects of panic buying during the pandemic, when grocery store shelves were stripped of essentials and toilet paper became a rare commodity. It caused massive disruption to the supply chain that unnecessarily inflated prices due to manufactured overdemand.
The International Energy Agency (IEA) is attempting to ease economic pressure, approving the unprecedented release of 400m barrels from the global oil reserve, the largest release in history. The US will release 172m barrels from its strategic reserve as part of the IEA agreement. It will provide temporary relief at the bowser but is unlikely to affect the overall global price of oil if Iran continues to control the Strait of Hormuz.
The ensuing chaos of this conflict brings a grim economic prediction for Australians.
Economists estimate that every US $10 increase to the global fuel price adds 7-10 cents/litre to the price of fuel. Additionally, the big banks are forecasting another two rate rises, putting increased pressure on homeowners already struggling with cost-of-living demands. And Australian markets have become highly volatile, which can have a chilling effect on investment.
A major concern for the Australian economy is prolonged inflation leading to the worst-case-scenario of stagflation. Australia is highly dependent on the health of its international imports and exports, especially maritime transport. 98% of the country’s trade by volume travels by sea, including the essential goods shipped by MADCAP Global.
The impacts of this conflict have had a devastating ripple effect on the international supply chain, with major fractures already occurring that have affected everyday operations for businesses around the world.
With no peaceable resolution in sight, the impacts will extend to every global industry reliant on petrochemical products. From transport, textiles, and agriculture, right down to the production of film plastics that are used in a vast array of everyday consumer products.
In many ways, Australia could be brought to a standstill. Nearly every aspect of our lives depends on a steady and secured flow of goods facilitated by a vast, integrated logistics network. Without trucks, Australia stops, and right now transport operators are struggling to justify the rising costs of doing business.
The international fallout from this conflict extends beyond economic factors as strategists contemplate escalation to an all-out world war involving multiple nations.
Iran is known for its use of proxy combatants, recruiting various allies in friendly regional governments as well as paramilitary and known terrorist organisations to carry out attacks.
The overriding concern is that Iran is in possession of nuclear material. The problem, however, is that no-one really knows where Iran has stored it. Latest data shows Iran has enough weapons-grade material for at least 16 explosive devices.
The most likely scenario would be the deployment of a dirty bomb that could disperse radioactive material over a wide area, causing mass panic and disruption as well as extensive ecological damage that would take years to remediate.
In the age of drone warfare, unmanned machines can remotely deliver catastrophic payloads to a specified target, deployed by vessels stationed offshore. The secretive nature of global political relations makes it difficult to identify friend from foe as alliances shift with the tides. The discovery of a cache of Iranian drones supposedly destined for an attack in California raised serious questions about Iran’s capability to for long-range retaliation attacks.
Australia has taken up its role in the conflict, providing ADF equipment and personnel to assist in the operation. But Australia, along with other NATO nations, were less than responsive to US President Donald Trump’s call-to-action over liberating the Strait of Hormuz.
Our world leaders and elected political representatives have failed us immeasurably.
How did we get here, yet again? At the end of World War II, a new international order was established that promised peace, prosperity, and the end to global conflict. Since then, we have been embroiled in a seemingly endless cycle of war: Korea, Vietnam, Russia, the Balkans, Afghanistan, Iraq (both times), East Timor, Ukraine.
Nuclear anti-proliferation treaties have been allowed to expire without renewal and now more than ever the world appears intent on driving itself into oblivion by its own hand. And where is our Prime Minister? Invading the grounds of NRL matches (how good is football?!) and generally enjoying his taxpayer-subsidised tenure as figurehead of this once-great country called Australia.
And he is a member of a growing cadre of impotent, ineffective leaders that have weakened Australia’s global position through spineless diplomacy and inept governance. The majority of our manufacturing has been outsourced overseas, and we’ve allowed ourselves to become overly dependent on foreign sources for goods and services.
Nor has any effort been made to preserve our national identity and culture, however amorphous that may be. Extreme ideas and anti-Australian sentiment have been imported and allowed to fester in our communities, fracturing our society along ideological lines.
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In the early years of Australia’s nationhood, more than 416,000 men enlisted to fight in World War I; close to a million more fought in World War II, and more than 60,000 served in Vietnam. Once a country with a proud and formidable military history, Australia today can barely defend itself, let alone anyone else.
It’s not that we won’t send a warship to help liberate the Strait of Hormuz, rather that we can’t spare one. Our fleet of naval warships has shrunk from 11 two years ago to just two, with several due to be decommissioned shortly and not replaced until 2029.
Australian military spending in 2026 is around $59 billion, accounting for just over 2% of our GDP. By comparison, the US has devoted more than $960 billion to military budgets, representing about 3.4% of its GDP. This makes us heavily reliant on our alliance with the US for military assistance.
Now that one of our strongest allies of the past century has become malignantly unpredictable and belligerent, where does Australia stand and how will we weather another world war without them or a standing line of defence?
As the conflict escalates, so do fears that another global economic collapse is imminent, which will decimate Australia’s already fragile position. Neither US-Israel nor Iran have shown any sign of relenting, and the situation grows more volatile every day. In a war of attrition, Australia cannot sustain itself.
