Unfortunately, it looks like the war in the Middle East is settling into an uneasy stalemate. Both sides have set up blockades and the ceasefire has been extended, but there is no peace deal, no scheduled talks, and no clear momentum towards a resolution.
This means a prolonged supply shock and no clear timeline for it to end:
⛽ The price of oil continues to grind higher, with prices for June delivery above $102, and December futures are above $80.
⛽ The IMF has cut its forecast for global growth to 3.1%, with a severe scenario of just 2% if disruption extends into 2027
⛽ The supply disruption is set to top 1 billion barrels of lost supply even if the strait were to reopen int he next few days.
⛽ Drawdowns of strategic reserves has helped soften the blow to date, but reserves are rapidly depleting with some countries starting to hit drawdown limits from early- May, with widespread shortages from the end of May.
Reporting from the White House suggests the US strategy is now simply to maintain pressure and wait. The approach appears to be “keep the blockade in place, keep the threat of resumed bombing on the table, and wait for Iran to come forward with a concrete proposal.” That could take weeks. It could take months.
For Business owners in Australia, the message is now unambiguous. This is not a short-term disruption. If you haven’t already, it's time to:
📑 Urgently reforecast your cash flow on the assumption that the recent decline in fuel prices was temporary and increased costs will persist through to at least July (and possibly to the end of year).
📑 Renegotiate customer contracts to include cost pass-through mechanisms.
📑 Engage with the ATO and lenders now while the support window is still open.
📑 If your business model doesn't stack up with increased input costs, get restructuring advice while lots of options remain open to you.
I’d love to be wrong, but hope is not a strategy. It is far better to plan for six more months of disruption and be pleasantly surprised than to plan for a quick resolution and be caught out.