The conflict involving the United States, Israel and Iran could push up global oil prices and raise fuel costs for New Zealand if energy supplies from the Persian Gulf are disrupted, according to a new report from the New Zealand Ministry of Foreign Affairs and Trade.
The Tuesday report warns that the conflict represents “a key risk to the global economy and New Zealand’s trade into the region,” particularly if shipping through the Strait of Hormuz — a major global energy corridor — is disrupted.
“Of most concern for the New Zealand economy is the potential for a protracted period of disruption to global energy supply, particularly the disruption to oil transiting the Strait of Hormuz,” the report obtained from the ministry’s website stated.
Around 20 per cent of global oil supply passes through the waterway, making it one of the world’s most critical energy routes.
Although New Zealand no longer imports crude oil directly from the Gulf, it remains exposed through its fuel supply chain.
The report noted that the country now imports refined petroleum from Asian economies such as South Korea, Singapore, Malaysia and Japan, which rely heavily on Middle Eastern oil.
“If supply from the Persian Gulf is disrupted then these Asian refineries will be forced to compete for oil supply from elsewhere, putting upward pressure on global oil prices, with consequences for imported petroleum products into New Zealand,” the report says.
A sustained rise in oil prices could ripple across the economy.
“An extended period of rising fuel costs would likely be a drag on household consumption at a time of ongoing cost-of-living pressures,” the report stated.
It added that higher energy prices would affect more than transport costs.
The report also noted, “Rising oil prices won’t just show up at the petrol pump but will also pervade the economy via rising business costs for services such as transportation and energy-intensive goods such as fertilisers.”
Energy markets have already reacted to the escalation.
Brent crude futures had risen more than US$12 a barrel earlier this year amid geopolitical tensions and have increased by a further US$10 to over US$83 per barrel since the conflict began, the report says.
Some analysis suggests oil prices could climb even higher if the situation escalates.
“Global oil prices could almost double compared to January lows to exceed USD100 per barrel in the event of a complete closure of the Strait of Hormuz,” the report noted.
The conflict could also add pressure to global financial markets.
“The conflict may also lead to increased volatility in global financial markets, increasing the risk of asset market volatility, increased risk premiums for borrowing costs, and a weaker New Zealand dollar,” the report said.
However, it adds that markets have so far reacted cautiously.
“To date markets have remained relatively calm. Oil prices have increased significantly, but are well below levels experienced in the aftermath of Russia’s invasion of Ukraine.”
The report also highlights New Zealand’s direct trade exposure to the Middle East, which remains relatively small but concentrated.
New Zealand exported $3.4 billion worth of goods and services to the region in 2025, representing about 3 per cent of total exports, with dairy products accounting for nearly 70 per cent of that trade.
Supply chains, global trade routes at risk
Beyond energy markets, the conflict could also disrupt international shipping and aviation routes that support global trade.
On 28 February 2026, the United States and Israel launched large-scale strikes inside Iran, prompting retaliatory missile and drone attacks by Iran across the region.
“Iran subsequently responded within hours with waves of ballistic missiles and drones, aimed not only at Israel and US forces but also at Gulf states hosting US bases, including Saudi Arabia, Qatar, Bahrain, Kuwait, and the United Arab Emirates,” the report stated.
Iran has also announced the closure of the Strait of Hormuz, though shipping traffic has not fully stopped.
“Vessel tracking has indicated reduced movement but not a complete shutdown,” the report said.
Air travel across much of the Middle East has also been disrupted.
“Dubai, Abu Dhabi, and Doha airports are operating only limited flights, and flights across the region are still suspended or severely disrupted.”
The disruption matters for New Zealand because the region serves as a major global transport hub.
“Dubai international airport is an especially important transit hub for high-value low-volume exports and imports to and from Europe,” the report noted.
If the conflict continues, global supply chains could begin rerouting, though at a higher cost.
“Vessel rerouting is already occurring via alternative corridors, including around the Cape of Good Hope, albeit affecting transit times and operational costs.”
The scale of the economic impact will depend on how the conflict develops, the report concludes.
“If the conflict remains largely contained… the worst of the economic impacts are likely to be contained to key sectors via short-term supply chain disruptions.
“However, should the conflict broaden regionally… the medium-term risks to our trade and economic interests are likely to be more significant,” it concluded.
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