US crude oil has posted its biggest weekly gain in futures trading history.
The war in the Middle East, which halted shipping through the Strait of Hormuz, has led to a major disruption to global fuel supplies.
The strait is used to transport roughly 20 per cent of the world’s crude supplies.
By close of trade in New York, West Texas Intermediate (WTI) Futures had surged 12 per cent, or $90.90 per barrel.
Global benchmark Brent rallied 8 per cent, to settle at $92.69 per barrel.
The National Roads and Motorists’ Association (NRMA) offers advocacy for motorists.
It monitors the price of oil and its impact on motorists.
NRMA spokesperson Peter Khoury said the spike in the oil price was “obviously very worrying”.
“Our concern is that there’s more pain to come,” he said.
Mr Khoury said “pray we don’t get there” but has warned the price of unleaded at the pump could soar as Tapis — the benchmark for Australian petrol prices — pushes past $133 per barrel.
Iran attack’s impact on power prices
The roughly 35 per cent increase in the WTI crude oil price this week marks the biggest weekly gain in the history of the futures contract dating to 1983.
Brent’s weekly gain is the largest since April 2020 which was during the COVID-19 emergency.
“We are marching closer each day to $100 for a barrel of oil,” said Michael Arone, chief investment strategist at State Street Investment Management.
“That has caused much greater volatility and anxiety.”
Iranian media reported on Monday that the Strait of Hormuz was closed and Iranian officials had threatened to attack any ship trying to pass through the narrow passage.
A number of tankers have already been hit since the war broke out.
The surging price of oil has also raised concerns about global economic growth.
“Rising oil prices, if persisted, have sparked fear of a global “stagflation” scenario through two channels,” AMP economist My Bui said.
“One, higher commodity prices, with oil up to $150/barrel in case of a prolonged war, and supply disruption could raise household energy costs and manufacturing input costs, while reducing households demand for discretionary consumption.”
“[Meanwhile] higher geopolitical risk and economic uncertainty will force households and businesses to delay big purchases, holding back investment plans while adopting higher borrowing costs.”
The US government gave details on Friday about a plan that President Donald Trump announced earlier to offer insurance guarantees and naval escorts to ships crossing the strait, but it had little effect on the market.