Australians hoping the economic consequences of the Iran war were beginning to fade have been given another warning.

Oil prices are climbing again.

The anticipated reopening of the Strait of Hormuz remains uncertain.

Shipping through one of the world's most important energy corridors remains severely constrained.

And Australia has now removed the temporary fuel-excise relief that protected motorists from part of the original price shock.

That combination matters.

Brent crude rose more than 2 per cent on Tuesday to around US$89.64 a barrel, reaching its highest level in more than a week as hopes for a settlement between Iran and the United States weakened.

Only days earlier, there had been growing optimism that negotiations involving Iran and Oman could lead towards new shipping arrangements through the Strait of Hormuz.

That optimism has diminished.

The result is a renewed risk that Australia's temporary fuel reprieve could prove just that — temporary.

Oil is moving higher again

The international oil market has been extraordinarily sensitive to developments involving Iran and the Strait of Hormuz.

That is understandable.

Hormuz is one of the most important petroleum transit routes in the world.

When shipping through it is constrained, the consequences extend far beyond the Middle East.

On Tuesday, Brent crude climbed $1.92, or 2.19 per cent, to around US$89.64 a barrel.

US West Texas Intermediate crude increased by a similar proportion to around US$84.04.

Those numbers matter in Australia.

Australian motorists do not purchase Brent crude at the petrol station, but international petroleum prices ultimately influence the refined-fuel markets supplying this country.

If crude remains elevated, the pressure eventually moves through the international fuel system.

Shipping is still nowhere near normal

Perhaps more important than Tuesday's oil-price movement is what is happening on the water.

Reuters reported that only six vessels travelled through the Strait of Hormuz on Monday.

The recent 10-day average had been approximately 11 vessels.

Crude movements through the strait were reported at around 3 million barrels per day, down from approximately 4.4 million barrels per day during the previous week.

That tells us something important.

The market is not simply responding to political rhetoric.

Physical energy flows remain constrained.

Until shipping through Hormuz begins returning towards normal levels, the risk premium attached to international oil is unlikely to disappear completely.

What happened to the proposed reopening?

There had been encouraging signs.

Iran said negotiations with Oman concerning new shipping lanes through the Strait of Hormuz were approaching their final stages.

That raised expectations that one of the largest disruptions to global energy markets could finally begin easing.

But reopening Hormuz has become entangled with the wider political settlement between Iran and the United States.

Both sides are now demanding compensation connected with the conflict.

That has reduced expectations of a rapid agreement.

The important distinction for Australia is that negotiating a shipping arrangement and actually restoring normal oil movements are not the same thing.

Markets ultimately need ships moving.

Australia has lost its fuel-excise buffer

This latest oil increase arrives at an inconvenient moment.

Australia's temporary fuel-excise assistance has ended.

The Federal Government initially introduced substantial relief as international fuel prices surged during the Middle East conflict.

The original measures included a 32-cent-per-litre reduction.

The assistance was subsequently tapered to 16 cents per litre during July.

That final temporary reduction ended in early August.

The Heavy Vehicle Road User Charge received corresponding temporary relief.

Those measures helped insulate Australian motorists and businesses from part of the international shock.

That insulation is now gone.

If international fuel prices rise substantially again, more of the increase can flow directly towards Australian consumers and businesses.

The government now faces a more difficult decision

Fuel-excise relief was always intended to be temporary.

That is understandable.

Reducing fuel excise costs the Commonwealth substantial revenue.

The government cannot indefinitely subsidise every movement in international oil markets.

But the renewed increase creates an awkward policy problem.

The relief was removed partly as conditions appeared to be improving.

If the international situation deteriorates again, Canberra may face renewed pressure to intervene.

Doing so would provide cost-of-living relief.

It would also impose another cost on the federal budget.

Doing nothing preserves revenue but leaves households and businesses more exposed.

Neither option makes the international oil shock disappear.

It merely determines who carries more of the cost.

Diesel deserves particular attention

Petrol attracts enormous public attention because motorists see the price every time they pass a service station.

Economically, diesel may be even more important.

Trucks use diesel.

Farm machinery uses diesel.

Construction equipment uses diesel.

Mining operations consume substantial quantities of diesel.

Many commercial vehicles use diesel.

When diesel becomes more expensive, the effect travels through supply chains.

The consumer who never owns a diesel vehicle can therefore still pay for expensive diesel through groceries, construction, deliveries and other goods and services.

Australia imports inflation through fuel

This is where today's oil movement becomes more important than another story about petrol prices.

Australia is still dealing with elevated inflation.

The Reserve Bank's August Statement on Monetary Policy acknowledges that consumer-price inflation remains elevated, reflecting both domestic pressures and global cost pressures associated with the Middle East conflict.

That connection is critical.

Australia cannot control the international oil price.

But international oil can influence Australian inflation.

Fuel becomes more expensive.

Freight becomes more expensive.

Businesses face higher costs.

Some businesses absorb those costs.

Others increase prices.

Their customers may themselves be businesses, which then face their own decision about whether to increase prices.

An international oil shock gradually becomes domestic inflation.

The RBA has just reminded us why that matters

The Reserve Bank left the cash rate unchanged at 4.35 per cent at its August meeting.

Australia has already experienced three interest-rate increases during 2026.

That makes another sustained energy shock particularly unwelcome.

The RBA cannot reopen the Strait of Hormuz.

It cannot increase global oil production.

It cannot negotiate peace between Iran and the United States.

Raising Australian interest rates does not produce another litre of diesel.

But the Reserve Bank does have responsibility for maintaining price stability.

If an external energy shock begins spreading through Australian wages and prices, monetary policy has to take that broader inflationary effect into account.

That creates the uncomfortable possibility that Australians can ultimately pay for the Iran conflict twice.

First at the petrol station.

Then through the interest rate on the mortgage or business loan.

The timing could hardly be worse

Australia needs inflationary pressure to diminish.

Households need relief from high borrowing costs.

Businesses need greater certainty.

Property markets are subdued.

Construction costs remain important to Australia's housing challenge.

Governments are trying to manage cost-of-living pressures.

A renewed international oil shock works against many of those objectives simultaneously.

Even relatively small increases matter if they persist long enough to become embedded throughout the economy.

Freight is the transmission mechanism

Imagine a truck carrying groceries from a distribution centre to a regional supermarket.

The trucking company pays more for diesel.

Eventually it may increase its freight rate.

The supermarket receives products at a higher delivered cost.

Some of that increase may be absorbed.

Some may reach the shelf price.

Now multiply that process across thousands of trucks carrying food, building materials, machinery, clothing, appliances and virtually everything else Australians purchase.

That is why oil matters so much.

Fuel is not simply another item in the inflation basket.

It is an input into many of the other items.

Regional Australia remains particularly exposed

Distance magnifies the effect.

Regional Australians generally travel further.

Businesses serve larger geographic areas.

Goods travel greater distances to reach communities.

Farm products have to move from properties to processors and markets.

Tradespeople travel between jobs.

Tourism relies heavily on motorists and aviation.

When the price of moving a kilometre increases, communities requiring more kilometres naturally carry more exposure.

Airlines are watching too

Oil prices also matter to aviation.

Jet fuel represents a major airline operating cost.

Australia is unusually dependent upon aviation because of both its geography and its distance from major international markets.

Higher aviation costs can eventually influence airfares, airline margins or both.

That matters to business travel.

It matters to regional communities.

And it matters to tourism.

Another sustained period of elevated oil prices would therefore have consequences extending considerably beyond motorists.

The Australian dollar matters as well

International petroleum is generally traded in US dollars.

Australia therefore faces two variables.

The international price of oil.

And the Australian dollar.

A stronger Australian dollar can cushion part of an international oil increase.

A weaker dollar can magnify it.

That means Australians can sometimes experience fuel-price movements that differ from the headline movement in crude oil.

Watching Brent alone never tells the entire Australian story.

The real question is duration

One day of higher oil prices does not create an Australian economic crisis.

That needs to be emphasised.

Energy markets are volatile.

Prices can rise sharply and retreat just as quickly if diplomatic circumstances improve.

What matters now is duration.

If Hormuz shipping normalises and negotiations progress, the current increase may prove temporary.

If the political impasse continues and shipping remains restricted, elevated prices can persist.

Duration is what transforms an oil-market event into an inflation event.

Businesses can absorb a short-term increase.

They cannot absorb indefinitely rising input costs.

Eventually prices adjust.

The peace dividend has not arrived

That may be the most important conclusion from the latest developments.

Markets had begun pricing the possibility that the worst of the Hormuz disruption was approaching its end.

That confidence was premature.

Negotiations continue.

But ships are still not moving through the strait at anything approaching normal volumes.

Oil is rising again.

And the political settlement necessary to restore confidence remains unresolved.

Australia should therefore be careful about assuming the economic consequences of the Iran war are behind us.

Fuel security returns to the agenda

The continuing disruption also strengthens the argument for a serious Australian discussion about fuel security.

Australia is an enormous energy producer.

Yet the economy remains exposed to international refined-fuel markets.

The government is already supporting examination of whether additional domestic refining capacity could improve Australia's resilience.

That debate should extend beyond whether building another refinery is commercially attractive under normal conditions.

Energy security is partly about preparing for abnormal conditions.

The Iran conflict has demonstrated what those conditions can look like.

What happens next?

There are several developments worth watching.

The first is physical shipping traffic through Hormuz.

More ships moving safely through the strait would be considerably more meaningful than another diplomatic statement.

The second is Brent crude.

A sustained movement above current levels would increase the likelihood of additional pressure flowing into international refined-fuel prices.

The third is Australian wholesale and retail fuel prices.

The fourth is Canberra.

If international prices surge again, pressure for renewed fuel assistance will inevitably increase.

And finally there is the Reserve Bank.

The RBA's concern will not simply be petrol.

It will be whether another energy shock becomes broader Australian inflation.

The Times View

Only days ago, it appeared increasingly possible that reopening the Strait of Hormuz would begin removing one of the largest risks hanging over international oil markets.

That outcome has not arrived.

Shipping remains heavily constrained.

Oil is rising again.

And Australia no longer has the temporary fuel-excise buffer that softened the original shock.

None of this guarantees another surge in Australian petrol prices.

Diplomacy could still succeed.

Oil could retreat.

Shipping could normalise.

But the risk has clearly returned.

And today's Reserve Bank assessment demonstrates why Australians should care about considerably more than the number outside the local service station.

The Iran war has already demonstrated how an external energy shock can enter Australian inflation.

If Hormuz remains constrained long enough, it can do so again.

Australia's fuel reprieve may not be over — but it can no longer be taken for granted.