From petrol prices to broader energy security concerns, the conflict is already having a profound impact on the NZ economy.
Ten days after the US and Israel launched their bombardment, an estimated 1,700 lives have been lost in strikes on Iran and Israel. As the strikes continue, and Iran retaliates by targeting Israel and US bases across the region, the effects are being felt around the world. Damage to energy infrastructure and shipping routes out of the oil and gas rich region has seen prices surge globally, including New Zealand, where the government yesterday announced the establishment of a ministerial oversight group on economic security, with a focus on fuel and supply chains.
This is the state of play, in numbers.
$119.50
The US dollar price that crude oil barrels hit on Monday – the highest since the Ukraine war broke out and double the levels from December. It has since fallen to under $85, following indications from the Group of Seven finance ministers that they were willing to take “necessary measures” to stabilise energy prices.
$3
The price breached across many parts of New Zealand for 91 fuel per-litre. There have been some reports of queues at service stations.
20%
The proportion of the world’s oil – most of it bound for Asia and the Pacific – that travels via the Hormuz Strait, the pinch point on the southern Iranian coast that connects the Persian Gulf with the Gulf of Oman. The strait has been in effect closed to shipping since war broke out. The land masses are separated by just 33km at the narrowest point, with the shipping lanes measuring 3km wide in each direction.
It’s not just oil – around 20% of the world’s LNG, which the government has determined to be integral to New Zealand’s energy security – is shipped through the Hormuz Strait.
And then there’s fertiliser. Huge quantities of compounds used for agriculture in New Zealand and elsewhere, such as the nitrogen-rich urea, are shipped via the strait. The combined impacts of spikes in prices for fuel and fertiliser have innumerable knock-on effects, not least in food costs.
n
The really important unknown, where n = how much longer the war will persist. Speaking to media on Monday afternoon, Christopher Luxon said that the impact on New Zealand’s economy, like many others, “will depend on the duration, scale and intensity of the conflict”.
On Tuesday morning, NZ time, Donald Trump stated that the war on Iran was “very complete, pretty much”.
3.1%
The fall in the NZX on Monday. The drop, the most severe for 11 months – Trump’s tariff-spray “liberation day” – mirrors activity in many stock markets, including Australia and Japan.
15%
The fall in the Air New Zealand share price over the last five days. This morning, the airline announced via the NZX that it has suspended earnings guidance and warned it may have to increase prices and reconsider schedules in the wake of a surge in jet fuel prices.
The finance minister, Nicola Willis, says at this point there has been no discussion about assistance to the company, which is majority state-owned.
28
The days of petrol, diesel and jet fuel stocks in New Zealand as of yesterday, according to Luxon. There are another 29 days’ heading our way on ships that have entered our sovereign waters, he said, adding: “Right now our domestic fuel stocks are healthy and scheduled deliveries are on track”.
Winston Peters this week argued that the previous government was guilty of “economic sabotage” for failing to intervene to halt the shutdown of the refinery at Marsen Point in 2022. His NZ First deputy Shane Jones, the associate finance minister, said this week he’d sought legal advice on options if undertakings on fuel deliveries are not met.
29
Days until the next Reserve Bank decision on the official cash rate (April 8). The Monetary Policy Committee is likely to face a prickly one, with energy costs driving inflation across large parts of the economy in the short-term and the spectre of stagflation. The Bank will need to “look through the near-term noise”, says Jarrod Kerr, chief economist at Kiwibank. “It may well have to tolerate higher inflation in the short run to avoid tightening into a slowing global economy.”
79
Days until the Budget is published (May 28).
242
Days until the general election (November 7).
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