US and Israel’s strikes on Iran put oil price, AUD in focus ahead of crucial GDP data
The strikes on Iran over the weekend and fears of escalation could trigger a spike in oil prices, raising inflation fears and overshadowing an expected uptick in growth in Australia.
Crucial economic growth figures are at risk of being overshadowed by US and Israel’s decision to strike Iran over the weekend, a move which economists say will kick off a fresh wave of geopolitical uncertainty and instability for markets.
Ahead of the strikes, AMP chief economist Shane Oliver was already warning oil prices could spike above USD70 ($98.3) if there was an escalation in Iran, which would be expected to risk adding 5 cents a litre to petrol prices in Australia. Petrol price rises can be a significant contributor to inflationary pressures, affecting CPI directly and contributing to the price of goods more broadly by increasing transportation costs.
Gold and silver prices were rising last week on the back of this rising geopolitical risk, along with oil prices.
But this could be worsened by an Iran retaliation, Oliver said, which could include “disrupting neighbouring countries oil exports or blocking the Strait of Hormuz through which 20% of global oil supplies flow”. In such a situation, he warned a spike above USD100/bbl could be likely, which translates into 40 cents a litre or more to local petrol prices.
