Trump says 'let the oil flow'. But will the US-Iran peace deal bring Australians relief?

IN BRIEF

Experts say if the peace deal provides enduring stability, it could avert the worst potential economic impacts of the conflict.

The deal is unlikely to influence the Reserve Bank's next interest rates decision on Tuesday.

United States President Donald Trump's declaration that a peace agreement has been reached with Iran has raised hopes of easing pressure on global energy markets and reducing one source of inflation risk.

"The Deal with the Islamic Republic of Iran is now complete. Congratulations to all! Ships of the World, start your engines. Let the oil flow!" Trump posted on his Truth Social platform on Monday.

The agreement, expected to be formally signed in Switzerland on Friday, includes plans to reopen the Strait of Hormuz , a narrow shipping corridor through which around one-fifth of the world's oil supply normally passes.

But analysts say that for Australia, that matters less because of where the country buys its oil and more because of how global energy and shipping markets operate.

While easing tensions may remove one source of pressure on fuel and inflation, analysts caution any economic benefits for Australians will depend on whether the agreement holds and how quickly normal trade conditions resume.

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What does a peace deal mean for Australian households?

While Australia does not directly import oil from Iran, households are not insulated from instability in the Middle East.

Professor Tim Harcourt, chief economist at the University of Technology Sydney, told SBS News that energy markets remained globally connected and disruptions quickly flowed across borders.

"Oil prices set world markets and flow through right around the world," he said.

Harcourt said the Strait of Hormuz was one of several globally significant trade corridors and disruptions had consequences extending well beyond energy.

"When you affect those trade routes, you see delays but also higher prices because of supply shortages."

The Strait of Hormuz has effectively been closed since late February. Source: AAP / Amirhosein Khorgooi / AP Professor Ben Fahimnia, chair of supply chain management at the University of Sydney, said markets respond not only to actual disruptions but also to expectations about future risk.

"The reported easing of tensions and reopening of the Strait of Hormuz will place some downward pressure on global oil prices, assuming the agreement holds and markets gain confidence that major supply disruptions are less likely.

"However, energy markets react not only to actual disruptions but also to perceived risks, so some volatility may remain in the short term."

Fahimnia said disruptions in shipping routes could eventually flow through to households via freight, supermarket prices, transport costs and business operating expenses, but the relief wouldn't be imminent.

Professor Richard Holden, vice chancellor's professorial fellow and chief economist at UNSW Sydney, said oil remained globally priced regardless of where Australia sourced supply.

"When supply is constrained, oil goes up, and that becomes an input into fuel prices Australians pay at the bowser."

When could peace perks flow through to Australia?

Economists say benefits from easing energy prices are unlikely to be immediate, and may be shaped as much by domestic settings as global developments.

But Harcourt said Australians could potentially begin noticing changes within weeks rather than days, though broader cost-of-living effects would likely take longer.

Changes in global oil prices typically take time to move through supply chains before appearing in household budgets, flowing first through wholesale fuel markets, freight costs and business expenses before affecting consumer prices.

Fahimnia said even if oil prices decline, Australians were unlikely to see immediate changes because of existing inventories, wholesale contracts and retail pricing cycles.

But economists also cautioned against assuming lower oil prices automatically translate into meaningfully cheaper fuel, and suggested any relief from lower energy prices may first appear through slower price growth, rather than households suddenly paying significantly less than they already are.

Domestic policy complicates the picture

The federal government has indicated it will not extend its temporary fuel excise reduction beyond 30 June , meaning motorists are expected to face higher fuel costs as tax settings return to normal.

The fuel excise was temporarily halved by the government earlier this year in response to soaring global oil prices caused by the war, slashing 26 cents per litre.

The measure cost more than $2.5 billion over three months and helped ease headline inflation, but commentators remain divided over whether extending it would have delivered longer-term relief or contributed to inflation and higher mortgage pressu…