Iran War: Fuel set to rise as oil surges after Middle East tensions escalate
Thursday, 19 March 2026
Motorists should brace for fuel prices to go higher in line with the rising price of oil, KiwiBank chief economist Jarrod Kerr says.
Brent Crude prices spiked after Israel overnight attacked Iran’s natural South Pars gasfield, the largest field in the world, sending oil prices to $US109 a barrel this morning and prompting a vow to retaliate from Iran.
Kerr said the situation felt like it would escalate further in the Middle East, “which unfortunately, is something we're all kind of bracing for”.
“We're going to see much more savage and brutal moves in financial markets. I don't think they've actually tested where the highs are,” he said.
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Oil prices spiked well above the US$111 a barrel during the Ukraine war and a big spike in oil prices would probably be needed to get United States President Donald Trump to start thinking about an exit strategy.
“Trump's proven himself time and time again that he goes very hard, tries to get what he wants, and then when the markets rebel and fight back, he does tend to sort of pull back.”
Tariffs were a good example of that, demanding ridiculously high numbers, and then, negotiating those down to 10 to 15%, he said.
It could take a big spike in the oil price that resulted in the financial markets “really starting to haemorrhage” and Washington to respond and pull back having achieved its objective. “The advice then becomes, ‘OK, we've got to get out of here now’.
“We need to see financial markets reacting in a way that forces the administration to bring things to an end,” Kerr said.
That’s what optimistic analysts were hoping for, “that this thing is done and dusted in weeks, not years”.
Justin Tighe-Umbers, who heads the National Road Carriers Association, said the price shocks would continue off the back of events overnight.
Fuel supply remained stable even though the level of diesel dipped to 47.1 days on hand, from 49.9 days.
That reflected transport companies buying fuel ahead of anticipated price hikes, Tighe-Umbers said.
“The fuel storage is looking stable and healthy.” The next couple of weeks would show the strength of orders being fulfilled, and would provide an of what was happening on supply side.
Transport companies had seen price hikes like this before, and were used to price volatility, which also occurred during the Ukraine conflict, he said.
Most trucking firms had mechanisms in their contracts to manage swings and fuel prices through to their customers, he said.
“But certainly this is really badly timed in terms of they are just starting to come out of a period of two years of economic decline and really suppress demand.
“For those that have had a difficult time just hanging on through the economic slowdown, this is going to be another significant blow.”