Published April 25, 2026  by Theo Loxley

Noticed your weekly grocery bill has crept up again? Or that filling the car has somehow added another $20 to a routine shop? You're not imagining it. And it isn't over.

In the eight weeks since military action erupted across the Middle East on February 28, the price of Brent crude the benchmark used to price most of the world's oil has jumped from roughly $61 a barrel at the start of the year to peaks above $118. As of April 23, Brent was sitting at $103.67 a barrel, more than $37 above where it was a year earlier.

That number on a screen in London or Singapore can feel abstract. But it has already started showing up at every checkout, every pump, and every freight invoice in the country.

This is the part most households haven't worked out yet: an oil shock isn't a fuel story. It's an everything story.

The trigger was geographic. The Strait of Hormuz the narrow stretch of water between Iran and Oman handles roughly a fifth of all globally traded oil. Through March and April, the strait has been described in market reports as functioning more like a combat zone than a shipping lane.

The International Energy Agency's chief has warned that around 13 million barrels per day are effectively missing from the global market, with no quick fix in sight. Refining and export infrastructure across the Persian Gulf has been damaged or pulled offline. Tanker insurance premiums have spiked. Routes have been redirected.

When you remove that much supply from a market that runs on tight margins, the price doesn't drift up. It rips.

The U.S. Energy Information Administration has called the Q1 2026 surge the largest quarterly price increase, in inflation-adjusted terms, in data going back to 1988. Analysts at the UK's Resolution Foundation have framed it as the most significant global energy disruption since Russia's invasion of Ukraine in 2022. Natural gas has climbed in lockstep, because much of the world's LNG flows through the same chokepoint.

Here's the part most people miss: oil isn't just what powers your car. It's the input cost that sits underneath nearly everything you buy.

Diesel powers the trucks that move groceries from farm to warehouse to shelf. It powers the trains and ships that move imported goods across the country. Fertiliser is largely made from natural gas. Plastics, packaging, asphalt, pharmaceuticals all of them have crude oil somewhere in the supply chain.

When diesel rises, food rises. When jet fuel rises, holidays rise. When freight rises, the cost of running a business rises, and most of that gets passed on.

Even if you cycle to work, eat home-cooked meals, and never fly you're still paying for oil. That's why this episode is different from a normal pump-price grumble. It's a system-wide cost reset.

Commonwealth Bank's economics team has revised its forecasts. Under their central scenario which assumes Brent at around US$120 a barrel until the end of June, then easing back toward US$80 they now expect headline inflation in Australia to peak at around 5.4 per cent by mid-2026. Trimmed mean inflation, the RBA's preferred underlying measure, is forecast to peak at 3.8 per cent.

Belinda Allen, head of Australian Economics at CBA, has framed the energy shock as a complication on top of an already tight economy. The country was already operating above its supply capacity, with inflation proving stubborn, before any of this began.

UNSW Business School research has flagged a more uncomfortable risk: stagflation. That's the combination of rising prices, slowing growth and softening employment three things that don't usually move together, and three things a central bank cannot fight at the same time.

Dr Nalini Prasad, who modelled Australia's specific exposure to the current Middle East conflict, has described the stagflation scenario as plausible if disruption persists. For households, what that means in practice is fewer rate cuts, stickier inflation, and a longer squeeze.

Not everyone feels an oil shock the same way.

A study published this month found that older Australians, lower-income households, and people who rely on cars for daily life bear the largest welfare losses from petrol spikes. Rural and regional households are particularly exposed: they drive further, have fewer transport alternatives, and pay higher pump prices to begin with because of distribution costs.

The same research argued something most policy debates miss that the cost of rising petrol prices isn't only financial. It shows up in stress, in cancelled trips to see family, in skipped social outings, and in the quiet sense that the household budget has stopped working. Petrol prices are unusually visible. Big numbers on roadside signs do something to confidence that other price rises don't.

For a deeper look at how these pressures are stacking on Australian families across rent, food, energy and healthcare, our cost-of-living crisis 2026 explainer breaks down the full picture.

This one surprises people. Oil prices and healthcare costs are linked more closely than most household budgets account for.

Pharmaceuticals rely on petrochemical inputs. Hospital logistics from ambulance fleets to medical supply chains are diesel-dependent. Even single-use plastics used in clinical settings have an oil price baked into them.

When global energy costs rise sharply, the operating cost of running a healthcare system rises with them. That doesn't always show up immediately on a bill, but it shows up in private health insurance premium cycles, in private hospital fees, and eventually in public health budgets.

The American experience offers a useful comparison. The number of Americans who can't afford healthcare in 2026 has climbed in part because every input cost in the system is rising at once. Australia has stronger public protections, but the underlying cost pressure is the same which is part of the reason telehealth access and bulk-billing availability are starting to matter more, not less.

There are roughly three scenarios doing the rounds in serious analyst notes.

Most major forecasters including the IMF, OECD and IEA are clustered around scenarios one and two. But the risk weighting on scenario three has been steadily rising through April.

Even on the more benign scenarios, there's a lag. Higher input costs in March and April are still working their way into retail prices in May and June. That means several things, in roughly this order:

This is the practical bottom line: the cost of running a household in Australia in mid-2026 is going to be higher than it was at the start of the year, regardless of how the geopolitics resolves.

A few things genuinely help, and they're worth doing now rather than later.

Lock in fixed energy contracts before the next review window if your provider is offering them at a reasonable margin. Audit subscriptions and direct debits that have crept up most households find at least one or two they had forgotten about. If you have a mortgage, talk to your lender about whether you're on a competitive rate. Refinancing windows close quickly when bond markets reprice, and several lenders pulled their sharpest offers in early April.

Build a small buffer if you can. Two or three weeks of essential expenses sitting in an offset or savings account makes a real difference when input costs are volatile. It is not a glamorous strategy. It is a quietly effective one.

Plan trips. Combine errands. Use the fuel apps to find cheaper price cycle days in your suburb. None of this is dramatic. In aggregate, across a quarter, it is the difference between a tight three months and a painful one.

Most importantly: don't assume the news cycle has captured the size of this. Markets, governments and households all tend to underestimate energy shocks until they have fully arrived. By the time everyone is talking about it, the cheapest fixes are already gone.

The Q1 2026 oil shock has already reset the global cost curve. Even in the optimistic scenario, prices do not return to pre-conflict levels this year.

For Australian households, the next two quarters will bring a slow, grinding adjustment at the pump, at the supermarket, in energy bills, and in the long-promised rate relief that now looks further away than it did in January.

The war is far from us. The cost is not. And most households haven't priced it in yet.

This isn't a temporary spike. It's the start of a new cost reality and the households that adjust first will be the ones who come through it in the best shape.

Sources: U.S. Energy Information Administration (April 2026), Commonwealth Bank Economics (March 2026), International Energy Agency, Resolution Foundation Macroeconomic Policy Outlook Q2 2026, UNSW Business School research, Australian Competition and Consumer Commission, Fortune oil price data (April 2026).