Well, no one can predict the future and I certainly hope that the war in the Middle East is over soon given negotiations over the weekend. It appears to be intractable.
That being said, I fear we have already sleep walked past the point of no return Apple dictation is randomly deleting words from my dictated sentences after I weird AI better or
Even in the best-case scenario where the Strait of Hormuz reopens in the next few weeks, Australian businesses should not expect fuel supply or prices to normalise quickly. The disruption has been deep enough that recovery will take months, not days.
- Brent crude settled near $101/barrel on Friday (down from $116 earlier in the week, but still roughly 60% above pre-crisis levels)
- The Strait is operating at around 5-6 vessel transits per day versus a historical average of 138 per day
- Australia holds roughly 46 days of petrol supply but diesel remains critically tight, with around 120 service stations nationally still reporting outages
- Terminal gate diesel prices are above 210 cpl in most capitals (Sydney 208 cpl, Brisbane 209 cpl, Darwin 213 cpl, Broome 222 cpl as at 8 May)
- The fuel excise cut expires on 30 June, adding another 26.3 cpl back onto pump prices
- The government has announced a $10 billion fuel security package in next week's budget, including a 1 billion litre government-owned reserve and a 10-day increase to the Minimum Stockholding Obligation
There is a dangerous assumption building in some commentary that a diplomatic breakthrough will rapidly translate into lower prices and restored supply. It won't, and the timelines involved make that clear.
The physical reopening will take months, not weeks. The Pentagon told Congress in late April that clearing mines from the Strait could take six months. The US Navy began mine clearance operations on 11 April using guided-missile destroyers and underwater drones, but the Joint Maritime Information Centre still rates the Strait as a CRITICAL maritime risk zone as at 5 May. The transit route through the Traffic Separation Scheme remains classified as "extremely hazardous due to mines not fully surveyed and mitigated." Even after the 1991 Gulf War, it took coalition dive teams seven days just to clear 450,000 square metres of a single port (Shuaibah) before it could reopen to shipping. The Strait of Hormuz is orders of magnitude larger and more complex. For historical comparison, areas mined in the two World Wars still have uncleared ordnance today. The US Navy itself has acknowledged that the goal is to create safe transit corridors rather than fully clear the waterway.
Insurance markets won't normalise for months after the shooting stops. Before Iran laid a single mine, war risk insurance effectively closed the Strait. Within 48 hours of the February 28 strikes, premiums surged from 0.25% to around 5% of hull value. On a vessel insured for $100 million, that represents a jump from $250,000 to $5 million per transit. Seven-day renewable policies replaced annual cover. Lloyds' Joint War Committee redesignated the entire Arabian Gulf as a conflict zone, and the major P&I clubs withdrew war risk extensions. Even though Lloyds has confirmed that 88% of underwriters still have appetite to quote, the commercial reality is that these premiums make many voyages uneconomic. After the Red Sea crisis began in late 2023, it took well over six months for insurance markets to partially adjust, and that disruption was far less severe than what we're seeing now. Analysts at Howden Re have described the repricing as permanent and structural, not a temporary spike that will reverse when the ceasefire becomes durable.
Australia is at the back of a very long queue to restock. Every oil-importing nation on earth will be scrambling to rebuild stocks simultaneously. The IEA has described the crisis as removing around 14 million barrels per day from global supply. Asian refiners, who supply the bulk of Australia's refined fuel imports, will prioritise rebuilding their own reserves before resuming exports. This is not speculation. It is how supply chains behave after every major disruption. The countries closest to the source and with the most purchasing power get supplied first. Australia, geographically distant and with minimal domestic refining capacity (just two refineries, at Geelong and Brisbane, covering roughly 20% of national supply), will be waiting. The government's budget package is a welcome acknowledgement of this vulnerability, but building 1 billion litres of government-owned storage is a multi-year project that does nothing for the next six months.
Second-order supply chains have their own recovery timelines. Fertiliser, petrochemicals, plastics, and semiconductor inputs that normally transit Hormuz are on separate restocking cycles that will take well beyond Q3 to normalise. The National Farmers' Federation has flagged potential food price increases of up to 50% if diesel disruptions persist through the planting season. Qatar's Ras Laffan LNG complex has sustained damage that will affect LNG production for years, not months. These shortages are compounding on top of the fuel price shock and will continue doing so regardless of what happens diplomatically.
For SMEs, the planning implication is straightforward. Do not build your Q3 and Q4 cash flow forecasts around a return to pre-crisis fuel costs. Diesel above $2.50/L and petrol above $2.00/L should be your base case through to the end of the year, and possibly well into 2027. The fuel excise cut expiry on 30 June will add another layer of cost on top. Businesses that are modelling a rapid return to normal are the ones that will get caught out. The ones that plan for a slow, contested recovery, and price accordingly, will be better positioned to survive what is shaping up to be the most difficult operating environment since the pandemic.