No easy exit: Iran’s leverage is already squeezing supply chains

Speaking on the latest episode of the CommBank View: Economics & Markets podcast, CommBank Senior Geoeconomics Analyst Dr Madison Cartwright said Iran's ability to disrupt shipping through the world's most important oil transit route has given it a sustained strategic advantage and sharply raised the risk of a prolonged period of higher energy prices.

"This conflict was never likely to be short lived," Cartwright said. "Once it became clear that decapitation strikes had failed, Iran's staying power - particularly through its asymmetric military capabilities - meant escalation was almost inevitable."

Why the Strait of Hormuz matters

Around a fifth of the world's oil supply moves through the Strait of Hormuz, making it one of the most strategically sensitive waterways in the global economy.

Cartwright said Iran has demonstrated it can effectively restrict traffic through the strait using cheap, mass-produced drones, or even the credible threat of them, making commercial shipping unsafe or uneconomic.

"These drones are inexpensive, easy to produce at scale and precise enough to make insurers and shipping operators unwilling to take the risk," he said. "Once that happens, supply is constrained even without a full closure."

That position is difficult to neutralise without significant military risk, Cartwright noted, meaning energy markets must now price in the possibility of persistent disruption rather than a short-lived shock.

Inflation risks extend well beyond oil

The economic impact of the conflict is already broadening beyond crude prices, increasing the risk of more persistent global inflation. CBA research shows prices for natural gas, fertilisers, plastics and aluminium have surged as energy supply risks intensify, lifting costs across manufacturing, food production and construction.

That breadth matters. Rather than a narrow fuel shock, higher energy prices are flowing through global supply chains, raising the likelihood that inflation pressures become more entrenched - particularly if the conflict drags on.