Trump’s Iran war exposes the fragility of New Zealand’s economy

Thursday, 19 March 2026

ANALYSIS: The war in Iran has shone a light under the covers of our economy, exposing just how tied we are to the global supply chains, and highlighting our lack of alternatives or reliable resilience.

The blockage of the Strait of Hormuz has signalled in no uncertain terms that our isolated island nation remains heavily reliant on black gold to keep the economic engine humming.

But for most New Zealanders, this doesn’t start in that vital waterway, It starts at the petrol pump, the supermarket checkout, and the freight bill quietly passed on in everything we buy.

What this means is simple: it’s about to cost more to get to work, more to put food on the table, and more for businesses to keep running.

We’re here because our supply chain vulnerabilities, energy reliance and lack of domestic alternatives have been years in the making – and is the product of choices we’ve made.

“We do produce crude oil in Taranaki, but almost all of it has historically been exported, and since Marsden Point stopped refining in 2022 our petrol, diesel and jet fuel have been imported,” says Hamilton Hindin Greene investment adviser Jeremy Sullivan.

“That means a war involving Iran, or any disruption around the Strait of Hormuz, can hit us through higher fuel costs, more expensive freight, and renewed imported inflation.

“The risk is not just higher prices at the pump.”

Aviation, freight, transport, tourism, agriculture and other fuel-intensive sectors are all heavily exposed to this risk, but the issue runs deeper than just a few businesses.

That exposure doesn’t stay in boardrooms. It lands in airfares, grocery prices, and the cost of getting goods to your town.

To understand the impact, you need only look at what is currently happening to Air New Zealand.

Higher oil prices are part of the problem, but our lack of refineries means we don’t actually import crude. We import the finished product: jet fuel in this case.

The price of that particular product has blown out, hitting Air New Zealand directly and eventually passengers – through higher fares, fewer routes, or both.

Air New Zealand is simply the first company to be hit by this. Others will follow as this crisis drags on and those higher prices start to feed into our supply chains, reminding us that we need to start thinking seriously about the structures within New Zealand.

“What we can realistically do is improve resilience rather than pretend we can fully insulate ourselves,” says Sullivan.

“That means holding stronger fuel inventories, diversifying refined fuel supply routes, and reducing long-term oil dependence through electrification and efficiency.”

The diesel issue

Economist Cameron Bagrie told Stuff this week diesel is also crucial because our agriculture and logistics industries depend on it.

Price rises in diesel make it more expensive to move our agricultural products from the source to the supermarket shelves, but it doesn’t end there.

The machinery used in agriculture is often also powered by diesel, which makes a steady supply imperative to productivity among our food producers.

It doesn’t stop there. Urea (a highly concentrated natural fertiliser) prices have also spiked more than 22%, according to Westpac economist Kelly Eckhold.

That cost doesn’t stay on the farm. It shows up months later in your grocery bill.

Missed opportunities

As pointed out by Sullivan, one of the key ways we can reduce our long-term oil dependence is through electrification and efficiency.

A 2025 Rewiring Aotearoa report revealed that approximately 10 million machines powered by diesel, gas, petrol or other fuels could be switched to renewable energy.

The report showed that among the rural businesses surveyed, 80% of machine inventory could be electrified.

We’re still some way off electrifying the heavy-duty trucks and machines, but there is certainly room to make incremental improvements, which will lessen our dependency on fossil fuels.

The problem is that electric machinery often costs more than fossil fuel alternatives, an expense stretched out even further when the purchase is financed through a loan.

The individual farmers can make this happen, but the Government can also play a role.

Australia, for instance, has taken the ‘carrot’ rather than the ‘stick’ approach by introducing the Clean Energy Finance Corporation, which gives farmers access to loans below market rates for electric tractors, utes and heavy machinery.

The Australian Government has also introduced tax benefits, which again save farmers money if they adopt zero-emission technology.

The United States has gone even further, offering a grant of up to 50% of the cost for renewable energy systems and energy efficiency improvements (up to a value of US$1 million).

The question isn’t just what governments overseas are doing — it’s whether New Zealanders will keep paying the price for being this exposed.

Imagine, just for a moment, how much better we’d all feel if the fuel en route were enough to serve our country’s needs for 100 rather than 50 days.

Those added 50 days are what we’d call resilience.

Because right now, we’re only ever a few weeks away from a global shock turning into a household problem.

So what are your thoughts on what this crisis shows about the New Zealand economy? Let us know in the comments section below.