US-Israel-Iran conflict could push global oil prices higher, raising fuel costs and living expenses in New Zealand if Persian Gulf supply is disrupted

The New Zealand Ministry of Foreign Affairs and Trade has warned that the escalating conflict between the United States, Israel, and Iran could disrupt energy supplies from the Persian Gulf, driving up global oil prices and increasing fuel costs in New Zealand.

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A report released on Tuesday highlights the potential risks to the global economy and New Zealand’s trade in the region, particularly if shipping through the Strait of Hormuz—a vital corridor for roughly 20 per cent of global oil—faces prolonged disruption.

Although New Zealand does not import crude oil directly from the Gulf, the country remains exposed through its refined petroleum supply chain, which relies on Asian refineries in South Korea, Singapore, Malaysia, and Japan.

Disruptions to Gulf oil could force these refineries to compete for supply elsewhere, pushing global prices higher and affecting imported petroleum products in New Zealand.

The report warns that sustained fuel price increases could dampen household consumption amid ongoing cost-of-living pressures, while also driving up business costs for transportation and energy-intensive goods such as fertilisers.

Energy markets have already reacted to the conflict. Brent crude futures, which rose by over US$12 per barrel earlier this year, have surged by an additional US$10 to more than US$83 per barrel since the conflict began.

Analysts warn that prices could surpass US$100 per barrel if the Strait of Hormuz were fully closed.

The Ministry also highlighted the potential impact on global financial markets, including increased volatility, higher borrowing costs, and a weaker New Zealand dollar.

Markets have so far reacted cautiously, with oil prices remaining below the levels seen after Russia’s invasion of Ukraine.

Beyond oil, the conflict has disrupted regional trade routes. Military action in Iran and subsequent missile and drone attacks have affected Gulf states hosting U.S. bases, including Saudi Arabia, Qatar, Bahrain, Kuwait, and the United Arab Emirates.

Airports in Dubai, Abu Dhabi, and Doha are operating limited flights, while vessel traffic through the Strait of Hormuz has slowed, prompting rerouting via the Cape of Good Hope and higher operational costs.

New Zealand’s direct trade exposure to the Middle East remains relatively small, valued at $3.4 billion in 2025, with dairy products accounting for nearly 70 per cent. However, the region is a key transit hub for high-value exports and imports, making disruption costly.

The Ministry concluded that the severity of economic impacts will depend on the conflict’s trajectory.

Also read: Israel Intensifies Strikes on Iran Amid Escalating War

A contained situation may result in short-term supply chain disruptions, while a broader regional escalation could pose medium-term risks to New Zealand’s trade and economic interests.