It\u2019s the kind of thing most of us try to avoid thinking about\u2014the possibility of a prolonged war in the Middle East, particularly one that might drag in global powers like the US, Israel, and Iran. But the truth is, the effects of such a conflict would reach far beyond the war zones, potentially throwing economies around the world into turmoil. Australia, too, would feel the pain. In fact, according to a recent Oxford Economics report, a prolonged Middle East war could plunge Australia into a sharp recession.<\/p>\n\n\n\n
The scenario presented in the report paints a concerning picture. If the conflict leads to disruption of the Strait of Hormuz for six months\u2014a key shipping route for oil\u2014global oil prices could rise to over $150 per barrel, pushing inflation rates sky-high. This, in turn, would cause a ripple effect, slowing world growth by 1.2%. For Australia, the report forecasts a 1.1% drop in GDP by September 2026, marking the sharpest decline since the early 1990s (excluding the pandemic years, of course).<\/p>\n\n\n\n
Australia, as a nation highly dependent on global trade and fuel for its industries, would face a particularly tough time. Industries like transport, manufacturing, and mining, which rely heavily on fuel, would be hit the hardest. And, with inflation already on the rise, many Australian households would find their budgets stretched even thinner.<\/p>\n\n\n\n