Oil spike and market whiplash: Could carless days make a comeback amid Iran turmoil?

Tuesday, 10 March 2026

Oil briefly surged to US$120 a barrel this week, rattling global markets and raising a question for New Zealand drivers: could petrol climb back above $3 a litre?

Prices have since eased to around US$100, but the spike — linked to rising tensions in the Middle East and concerns about oil shipments through the Strait of Hormuz — has triggered sharp swings in financial markets.

For New Zealanders, the real concern is what higher oil prices could mean for petrol, inflation and mortgage rates.

Why petrol prices could rise

New Zealand has fuel stockpiles and additional shipments on the way, giving the country about 50 days of supply. But several factors influence what motorists pay at the pump.

AA principal policy adviser Terry Collins says the main drivers are the global oil price, refining costs (New Zealand no longer refines fuel domestically), the US/NZ dollar exchange rate, government taxes, and importer and retailer margins.

Fuel companies often buy petrol months in advance, meaning prices don’t always move immediately when oil spikes.

But Collins says retailers sometimes raise prices gradually to “feather in” increases rather than suddenly hitting motorists with a large jump.

Petrol has already reached $3 per litre in some locations, though averages across Wellington, Christchurch and Hamilton remain below that level.

Waitomo and Gull also tend to adjust prices more slowly than some competitors, so it still does pay to shop around.

Could oil prices push interest rates higher?

Oil runs through much of the global economy. When fuel costs rise, transport becomes more expensive — and those costs eventually flow through to consumers, pushing inflation higher.

Co-operative Bank chief executive Mark Wilkshire says financial markets are already reacting.

“Wholesale interest rates have risen as markets are concerned about the inflationary risk of rising oil prices,” he says.

“Markets are predicting the Reserve Bank may need to increase the OCR before the end of the year to curb this inflation.”

Wholesale rates influence what banks pay to borrow money, which eventually feeds into mortgage rates.

The Reserve Bank’s key challenge will be balancing the need to keep inflation under control while also giving the economy more time to recover.

“How things actually play out economically is in large part dependent on how long the conflict in the Middle East lasts and the extent of the supply chain disruption,” he says.

Why oil prices are moving

Oil markets have been volatile because of concerns about supply disruptions in the Middle East.

The Strait of Hormuz, between Iran and Oman, is one of the world’s most important oil shipping routes. Any threat to that flow can quickly push prices higher.

In the last 24 hours, there’s been a staggering whiplash effect in the oil market as prices spiked to US$120 before settling back to around $100.

That uncertainty has also shaken share markets, with the S&P 500, which tracks the 500 largest companies in the United States, fell about 4.5% from its late-February peak before recovering.

The NZ was also not spared, dropping 3.1% before recovering around 1.3%.

How NZ investors are reacting

Despite the volatility, Kiwi investors appear to be staying relatively calm.

Sharesies co-CEO Leighton Roberts says buying has far outpaced selling on the platform.

“Net deposits remain strong at $1.50 deposited for every $1 withdrawn,” he says.

Kernel Wealth founder Dean Anderson says market swings are part of long-term investing.

“For a long-term KiwiSaver member with a 20-year horizon, this volatility is actually the price of admission for higher expected returns,” he says.

How bad is this oil shock compared to 1979?

Oil shocks have changed life in New Zealand before.

During the 1979 Iranian Revolution, global supply disruptions sent prices soaring. Oil prices tripled and petrol in New Zealand jumped from about 10 cents to more than 60 cents per litre.

By July 1979, the government introduced carless days, banning drivers from using their cars one day each week.

Anyone caught breaking the rule could face a$400 fine — about $2500 in today’s money.

But here’s the surprising part. The actual drop in supply only was only around 4%. The real concern was panic buying as countries around the world moved quickly to hoard fuel. There was also a strong element of local panic buying as Kiwis rushed to the pump to fill up their cars.

Three things made New Zealand vulnerable during this period: our dependency on imported oil, the economic weakness of the economy and the declining NZ dollar value.

All of those appear to be reflected in the current context, but the world has changed quite significantly and the recent spike isn’t even close to causing the pain the 1970s oil shock caused.

The bottom line

The current oil spike is still below historic highs.

Just four years ago, after Russia invaded Ukraine, oil briefly reached US$139 a barrel— still below the record US$147 during the Global Financial Crisis.

Those highs were all painful when it came to the petrol price, but they didn’t the necessitate carless days we saw in the 1970s.

Countries, including New Zealand, have become better at securing fuel in advance and aren’t nearly as addicted to oil as we were in the mid to late 20th century.

Still, economists say the outlook depends on how long tensions in the Middle East last.

If the conflict drags on, Westpac modelling suggests petrol could average around $3 per litre nationwide, pushing inflation above 3% and keeping pressure on interest rates.

If tensions ease sooner, petrol prices could settle closer to$2.65–$2.70 a litre, with inflation easing again.

For now, both markets and motorists are watching the same thing: how long the conflict lasts — and whether oil supply is disrupted.