Rising fuel prices driven by the Middle East conflict are hitting the domestic tourism sector, with cancellations surging ahead of the Easter long weekend and airlines warning of mounting cost pressures.

Regional operators are fighting back with fuel vouchers and flexible bookings to keep visitors on the road, as some travellers scale back trips or delay travel entirely. 

Iran war live updates: For the latest on the Middle East war, read our blog.

The federal government confirmed hundreds of service stations across the country had been impacted by fuel shortages.

It comes as new Tourism Research Australia figures show overnight visitor spending fell $2.3 billion nationally in the year to December 2025, with Victoria ($1.2B), NSW ($410M), and Queensland ($379M) hit hardest.

A man fuelling up his car at Shell service station.

Fuel prices have sky-rocketed as petrol stations across the country experience shortages. (ABC News: Chris Taylor)

Don Kemble runs the Murrurundi Caravan Park, about two hours north of Sydney.

His park is usually booked out this time of year for a local festival, a nearby air show, and the Easter long weekend.

But instead, he has had two to three cancellations a day.

“People are worried they’ll get to a regional or rural area and find they’re stuck and can’t get home,” Mr Kemble said.

“Normally at this time, we’d have six or eight vans a night. Tonight? Zero bookings.”

A man in a cap stands in front of a sign saying Welcome New Arrivals.

Don Kemble says the caravan park is usually booked out this time of year. (Supplied)

Reflections Holidays, which manages 40 holiday parks on government-owned land in NSW, is issuing guests a $25 voucher to help with rising petrol costs.

Executive manager Peter Chapman said employees who travelled more than 10 kilometres to work would also receive a fuel allowance of up to $50 each fortnight.

“It’s about helping them continue their holidays and showing that operators are doing what we can to support both guests and our staff,” Mr Chapman said.

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He said the fear of fuel scarcity was influencing decisions, particularly for travellers heading to remote communities.

“That uncertainty is changing how people travel,” he said.A man with a button up shirt and cap in a caravan park.

Peter Chapman from Reflections Holidays park is offering $25 fuel offset vouchers. (ABC News: Billy Cooper)

In northern Australia, tourism operators are also feeling the pinch from rising fuel costs, particularly reef operators running large vessels to the Great Barrier Reef.

Tourism Tropical North Queensland CEO Mark Olsen said many businesses had seen costs rise by 50 to 60 per cent, largely driven by fuel price hikes.

“Marine tourism, bus tours, and accommodation providers are all feeling the squeeze,” he said.

Two older people standing in front of a car.

Paula and Michael Candlish have travelled 60,000 kilometres in their caravan but have now postponed their next trip. (ABC News: Billy Cooper)

Paula and Michael Candlish from Lake Macquarie in New South Wales have travelled 60,000 kilometres in their caravan across the country over the past four and a half years.

Ms Candlish said they had been planning a trip to Western Australia in May but have now postponed due to fuel shortages.

“If you get stuck somewhere remote, there’s no way of getting help until a fuel tanker turns up,” Ms Candlish said.

Easter quiet at the cattery

Michael Syms has run Sydney’s largest boarding facility for cats for decades. Normally, his cattery would be fully booked over the Easter holiday period, with a long waiting list.

“People are cancelling. They’re not wanting to head out to New South Wales country areas because they’re worried they won’t get fuel and be able to get back,” he said.

“I had a client that said he’s got enough fuel to get there, but he doesn’t know when he’ll be able to come back.”

A man holding a cat.

Michael Syms runs the Puss ‘n’ Boots Cattery in Sydney. (ABC News: Billy Cooper)

To ease the burden on clients, Mr Syms has introduced a pet taxi service, picking up cats directly from homes.

He’s also switched to an electric car for smaller trips, with a new electric van on the way. But he said uncertainty around how long the fuel crisis would last is having a bigger impact than the price itself.

“If we knew this would be over in a week, people would just book, but right now, no one knows,” he said.

A grey cat with blue eyes in a cage.

There’s been a downturn in bookings as uncertainty over fuel continues. (ABC News: Billy Cooper)

Cost of flights to surge

Airlines are also feeling the pinch, with Jetstar announcing it will cut about 12 per cent of some trans-Tasman flights from May, including Auckland to Sydney and Auckland to Brisbane.

In Asia, Vietnam Airlines will cancel dozens of domestic flights from next month, according to the country’s aviation authority.

A new ‘kangaroo route?’ Qantas shifts strategy as Middle East routes collapse

Qantas will increase capacity on flights between Australia and Europe after Easter, which experts say may see the “kangaroo route” evolve.

Associate Professor of Aviation Stephen Leib from Central Queensland University said the cuts would hit travellers.

“It’s going to mean fewer choices, higher fares and less convenient flight schedules,” Dr Leib said.

Dr Leib said airlines were choosing to cut flights over raising prices, because holidaymakers, who are Jetstar’s main customers, are very price sensitive.

“If passengers aren’t willing to pay higher fares, some routes may no longer stack up,” he said.

“Some of these changes may have already been on the cards, higher fuel costs just accelerate those decisions.”

Meanwhile, Qantas will increase capacity on flights between Australia and Europe, with extra services between Perth and Rome and from Sydney to Paris via Singapore.

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