Iran War: Crude at US$185 a barrel, 6% inflation - what is the best and worst case scenario for fuel in NZ?
Friday, 20 March 2026
As a run on petrol causes some stations to run dry, the Government is planning for the worst with Prime Minister Christopher Luxon bluntly stating on Thursday “things could get worse before they actually get better”.
While the Government reassured Kiwis there was more than a month’s worth of fuel available and no need to panic buy, Luxon and Finance Minister Nicola Willis became noticeably firmer in their warnings to New Zealanders about the impact of the war in Iran on fuel costs.
On Thursday, reports of petrol stations running out of fuel included Pak’nSave Lower Hutt and Whanganui, and New World Pioneer in Palmerston North.
There are a range of predictions in the market but one economist has told The Post if the conflict went on for three months, crude oil could reach US$185 a barrel and inflation could hit 6%; while a geopolitical expert called the Government’s increased preparedness sensible.
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Luxon told reporters on Thursday afternoon “hope is not a plan”, so preparations were under way for the worst problems the country could face.
Willis also confirmed that a financial support package was in the works for the families and households worst hit by high fuel costs.
The Post canvassed three experts about what the best and worst case scenario for the fuel crisis could be.
Best case scenario
Westpac chief economist Kelly Eckhold said in a best case scenario where a ceasefire occurred on Friday, it would take some time before fuel prices normalised due to the weeks-long process for crude oil to be shipped to refineries in Asia, turned into fuels and then shipped to New Zealand.
“Because there's been not much really going on for two or three weeks, there is going to be a bit of a shortage in the supply chain while that would get sorted out.”
Eckhold said because of that, consumers should expect to see prices stay higher than they were before the conflict.
“If that was the environment people would feel probably a lot more comfortable about the future because they would be less worried.
“They would know that things were going to get better soon, as opposed to now.”
He said if a ceasefire in the conflict did occur on Friday there would likely be a significant fall in energy prices which included Brent crude oil.
Infometrics chief executive and principal economist Brad Olsen told The Post if the best case scenario did occur, it would likely still take some time for the Strait of Hormuz to “unlock” and get supply lines moving again.
“You would likely still see pressures for the next month or so on price.”
Worst case scenario
Eckhold said he had looked at modelling for the strait staying shut for three months.
Over that time the price of crude oil could have increased from where it was now, about US$110 per barrel, to around US$185 a barrel. Oil at that price would likely result in 91 topping NZD$4 a litre.
That would also cause inflation to jump, he said.
“When we did the scenarios last week where we simulated that three-month closure of the Strait of Hormuz with those US$185 oil prices, then that was really associated with inflation in the 5% to 6% range.”
He said fuel disruption on that level would not have been an experienced by the country for decades.
“The three-month or longer closure scenarios are getting back to the same sort of nature that we saw back in the 1970s with the oil embargo or in 1991 when the Iraq Kuwait War was ongoing.”
Olsen said if the Strait of Hormuz was to remain closed for months and there was the potential for fuel shortages, it would be hard for households but particularly risky for production.
“You wouldn't be able to have quite as much primary sector activity going on, you wouldn't be able to have as much road transport and other transport operations going on and so you might not be able to get goods to store or away from the farm or whatever else it might be.”
Why it’s good to prepare for the worst case scenario
University of Otago international relations professor Robert Patman told The Post it was “sensible” for the Government to prepare for the war not ending soon.
Patman said New Zealand could not rely on the US, under President Donald Trump, ending the conflict.
“It can’t bank on Mr Trump walking away but Mr Trump is capable of reversing himself very quickly as we have seen before in other situations.”
He said they needed to prepare for the war going on for three to four months or more ‒ but there was the possibility of it ending quickly.
“I don’t think we are looking at a quick collapse of the Iranian regime.”