A combination of factors are piling pressure on the price of fuel and there seems to be no clear release valve for that pressure at the moment. That means
🛢️ Brent opened the week above $90 and has remained elevated.
🛢️ The US and Iran appear to be firmly stuck on an escalation treadmill with no clear deescalation route at the moment.
🛢️ Strait of Hormuz transits have effectively fallen back to zero.
🛢️ Nobody is talking about talking. The ceasefire was declared over on 10 July, Iran suspended its commitments on 18 July, and there is no active mediation going on.
🛢️ The quiet compounder is refining. Global refining margins have been rapidly rising as a refining shortage compounds the crude oil supply issues.
As we all know, Australia does not buy crude, it buys finished fuel from refineries in Singapore, South Korea and Malaysia, on about a month of reserves. The products market was short before Hormuz tightened, so the pump will outrun Brent on the way up. And excise stage two lands on 1 August, the remaining 16 cents plus indexation. Today's pump price is the cheapest realistic input to your August budget. Reprice your fuel line at current Brent plus full excise, and get rise and fall clauses into anything you quote across August.
🚢 The wharf is next
🚢 War-risk insurance for a Hormuz transit is now running at 3% to 10% of hull value, against about 0.25% before the war. On a USD 100 million tanker that is up to USD 10 million per transit, versus USD 250,000 in February.
🚢 Container spot rates have not moved yet. The World Container Index printed USD 4,547 (⬇️ 2% WoW) last Thursday, before the weekend escalation.
🚢 Iran has reportedly instructed the Houthis to prepare to disrupt Red Sea shipping. If that trigger gets pulled, container rates follow tankers.
Insurance and tanker costs are rising now, and containers are one bad night away from joining them. That lands in Australian landed costs with a one-to-two month lag, which puts it right on top of Christmas stock. Bring forward orders where you can, check whether your supplier contracts let war-risk and security surcharges pass through to you, and cost the season on the risk case, not last week's index. Thursday's container index print gives us the first post-escalation read.
🤖 The one input cost that is falling
⚙️ SpaceX's Grok 4.5 launched Thursday at less than half the price of Anthropic's top model, and is competitive on coding benchmarks.
⚙️ Moonshot's Kimi K3 went live Friday at USD 3 per million input tokens, within a few points of the best closed models on coding, with open weights expected within the week.
⚙️ ChatGPT Work, OpenAI's document and slide builder, is rolling out to its cheaper Plus and Business tiers.
Frontier AI capability is repricing from premium to commodity, squeezed from above by the labs undercutting each other and from below by open-weight models that are nearly as good for a fraction of the cost. When a supplier's prices are falling this fast, the worst move is locking them in. Do not sign an annual AI contract at today's list price without a repricing clause, and re-test each bounded workflow quarterly against a cheaper tier. The capability you paid top dollar for in January is mid-tier money now.
Bottom line: everything you move and make just got dearer to fuel and freight, while the thinking work got cheaper. The one job today is the fuel line. Reprice it for August before the excise makes the decision for you. Labour Force lands Thursday at 11:30am and we will cover it here.