Escalating tensions in the Middle East could lift petrol prices, disrupt global supply chains and create fresh inflation risks for New Zealand, according to research from ANZ.
The bank says fuel prices are likely to be the first and most immediate impact for households and businesses if the conflict disrupts global oil supply.
“In a textbook risk-off global oil supply shock, inflation in New Zealand is likely to bite first at the petrol pump,” ANZ says.
Around 20% of global oil consumption moves through the Strait of Hormuz, meaning any disruption in the region could quickly push up world oil prices.
ANZ says in a prolonged disruption scenario oil prices could climb above US$90 per barrel, up from around US$80 at the time the analysis was published.
Fuel accounts for roughly 4% of New Zealand’s Consumer Price Index basket, meaning any increase in global oil prices is likely to be felt quickly by motorists.
The bank says a sustained 10% increase in fuel prices could add about 0.2 percentage points to quarterly inflation, creating an upside risk to current inflation forecasts.
However, the duration of any price shock will be crucial. Short-lived spikes may have little impact on overall inflation, while sustained increases would have a more meaningful effect.
ANZ also warns the conflict could create second-round inflation pressures through global supply chains.
Shipping routes may need to be reorganised if tensions escalate, potentially increasing freight costs and insurance premiums. Those pressures could then flow through to a wider range of imported goods and services.
At the same time, the conflict could weigh on global and domestic economic activity if geopolitical uncertainty reduces business confidence, investment and trade volumes.
While New Zealand has little direct trade exposure to Iran, the wider Gulf region remains an important export market.
Goods exports to Gulf Cooperation Council countries totalled just under $3.4 billion in the year to January, accounting for about 4.2% of New Zealand’s total goods exports.
Those exports are concentrated in markets such as the United Arab Emirates and Saudi Arabia, particularly dairy and meat products, which rely on uninterrupted shipping through Middle Eastern sea lanes.
On the import side, New Zealand sources most refined fuel from countries including Singapore, South Korea, Malaysia and Japan, although those nations obtain much of their crude oil from the Persian Gulf.
ANZ says this means New Zealand’s fuel supply is indirectly exposed to disruptions in the region.
“Oil shocks are very difficult for inflation-targeting central banks to navigate, because they are both inflationary and negative for growth,” ANZ says.
The bank says the Reserve Bank of New Zealand is likely to initially treat any oil price shock as temporary, but sustained increases that lift broader inflation expectations could complicate monetary policy decisions.
With annual inflation sitting at 3.1% at the end of 2025, ANZ says the central bank may have less tolerance for further inflation surprises than in previous years.
