Iran Conflict & Australian Property: What You Need to Know
The Iran war has caused the biggest oil supply disruption in history. Oil prices have doubled, inflation is rising, and the RBA has already hiked rates twice. In the short term, expect fewer buyers and slower sales. But longer term, rising construction costs and a housing shortage actually make existing quality properties more valuable, not less.
What happened?
On 28 February, a US-Israeli strike on Iran triggered retaliation that shut down the Strait of Hormuz, the shipping lane carrying 20% of the world’s oil. The IEA called it “the largest oil supply disruption in history.” Brent crude jumped from around $60 to over $103, with roughly 8 million barrels a day of supply lost, against strategic reserves of only around 4 days’ worth, and LNG repairs expected to take up to 5 years.
Why Australia is more exposed than you think
Australia is a resource-rich country, but it imports 90% of its refined fuel. With only two refineries left and just 36 days of petrol reserves, below the international standard since 2012, the impact is already visible: Perth petrol jumped 45% in four weeks (from $1.56 to $2.26/L), remote areas are seeing shortages, and electricity bills continue climbing after a 23.6% increase.
The rate path has flipped
Higher oil prices drive up the cost of everything, pushing inflation higher. The RBA has already raised rates twice, to 4.1%, and markets now expect 2-3 more hikes, taking the cash rate toward 4.1-4.35%, versus an earlier expectation of cuts toward 3.1%. For a $600k mortgage, that means roughly $270 more per month, around $3,240 a year, compared to late-2025 lows.
Building new homes just got even harder
Oil prices flow straight into construction, through diesel transport, petroleum-based materials like asphalt, PVC and insulation, and energy-intensive manufacturing such as steel, cement and bricks. A new home already costs 47% more than pre-COVID, and builder insolvencies are at record highs, 1,894 so far in 2026. This is the hidden upside for existing homeowners: the more expensive it is to build new, the more valuable your current property becomes relative to replacement cost.
What to expect
Short term (0-6 months): fewer buyers, slower sales, and tighter budgets, especially at the affordable end. But population growth, immigration, and housing shortages haven’t gone away, and some cities even saw prices accelerate after February’s rate hike.
Medium term (6-18 months): building costs keep rising, fewer new homes get built, existing properties become scarcer, and rents keep climbing. The structural supply shortage hasn’t changed.
Long term (18+ months): if the conflict ends soon, oil could drop back toward $65 and rate cuts could start by mid-2027, with pent-up demand flooding back. If it drags on, there’s stagflation risk, but core areas with land scarcity and strong rental income should hold firm.
What should investors do?
Stress-test your cash flow so you can handle rates going another 0.5-0.75% higher. Focus on rental income, since properties with high yields and low vacancy weather rate hikes far better than those relying purely on capital growth. See the opportunity in the fear, when nervous buyers step back, prepared investors find better deals. Don’t panic-sell quality assets, Australia’s property story is driven by population growth, housing shortage and land scarcity, and the war hasn’t changed any of that, it’s actually made the supply problem worse. And watch the Federal Budget: possible CGT discount cuts and negative gearing changes could have a bigger long-term impact than oil prices.
This newsletter is for informational purposes only and does not constitute financial advice. Please consult with qualified professionals before making investment decisions.