Petrol price warning as Israel strikes Iran, pushing the value of oil up sharply with gold also rising

Aussies could soon be paying an extra 12 cents per litre at the fuel bowser after a strike on Iran’s nuclear facilities catapulted the price of oil. Israel launched the missile assault on Iran following days of festering tensions that saw the United States pull embassy staff out of Baghdad in Iraq. Iran and Iraq are neighbours and the US uses the Baghdad embassy as its diplomatic base for Iranian matters. The Israeli Defence Force has said the “pre‑emptive” attacks were aimed at eliminating Iran’s nuclear program and ballistic missile capabilities. The Strait of Hormuz, which is controlled by Iran, is a major shipping route for global oil markets. Around 20 million barrels per day of oil and oil products — equivalent to nearly 20 per cent of world demand — passes through the Strait of Hormuz. The prospect of a major supply disruption caused oil prices to soar and they are on track for the biggest weekly gain since 2022 when Russia invaded Ukraine. A barrel of Brent crude oil spiked as high as $US77.50, after starting the day’s trade below $US68. AMP chief economist Shane Oliver indicated the Australian could soon feel soon hip pocket pain. “Oil prices were already rising this month on signs of increasing risks and have spiked further – with the rise so far this month threatening a flow on of around 12 cents a litre for Australian petrol prices if sustained at these levels,” he said. “What happens in the very near term will depend on how Iran retaliates.” JPMorgan this week warned that prices could reach $US130 a barrel in a worst-case scenario in the Middle East. “We are back in an environment of heightened geopolitical uncertainty, leaving the oil market on tenterhooks and requiring it to start pricing in a larger risk premium for any potential supply disruptions,” ING head of commodities strategy Warren Patterson said. Meanwhile, the price of gold also jumped. In Australian dollar terms an ounce of bullion increased nearly 3 per cent to $5285 per ounce by 4pm AEST, closing in on the $5345/oz peak reached in April. Analysts say the next wave of oil and gold gains should come if negotiations between the United States and Iran stall. The sixth round of talks between US and Iran over Iran’s nuclear program are scheduled for Sunday in Oman. But earlier this week, US President Trump said he is becoming “less confident” about reaching a deal. The fallout of failed nuclear talks could a catalyst for a sustained price rise across the two commodities, according to Commonwealth Bank of Australia economist Vivek Dhar. “The most bullish scenario for oil and gold prices is if Iran attacks US interests or personnel in the region,” he said. “Such a move would force a combined US and Israeli military engagement against Iran. “The more likely scenario, which is likely to keep a gold and oil premium intact, is that Iran targets Israel with missile attacks like it did last year.” Westpac agreed this is the most likely scenario. “Given that the strikes appear to have been directed more at the Iranian military general staff, including the head of the IRGC and senior nuclear scientists, and that the US was not involved, that suggests that what we saw today was more of a pre-emptive strike and less of a sustained military conflict,” Westpac head of commodity and carbon research Robert Rennie said. “Traders will, however, be super-focused on Iran’s response and how targeted it is on Israel, versus proxy attacks. Risks going into the weekend are very high, and a push above the January highs for crude is very possible.” Local oil and gas producers rose sharply on Friday. Woodside’s stock finished up 7.4 per cent to $25.21 and Santos ended the day 3.7 per cent higher at $6.96. Gold producers also ran hard on Friday. Northern Star Resources finished 5.1 per cent higher at $22.53 and Evolution Mining rose 5.5 per cent to $9.20. But the broader share market was spooked by the renewed geopolitical volatility. The benchmark S&P/ASX 200 was down 0.2 per cent.