More than one million people would be jobless, inflation could double and Australia would plunge into a recession in coming months if the Middle East conflict continues and the price of crude oil soars to $US150 a barrel, according to experts.

The war and blockage of the Strait of Hormuz, a critical waterway where one-fifth of the world’s oil once passed daily, has caused a devastating economic ripple effect globally.

It has been six weeks since the US and Israel launched strikes at Iran, and the two-week ceasefire appears to be on shaky ground, raising fears of a prolonged war.

If this is the case, Australia could be in a world of pain.

Modelling by Deloitte Access Economics suggests that if the price of oil hit $US150 a barrel, almost one million Aussies may be out of work.

It would also mean more pain for household budgets already under the microscope, with inflation tipped to almost double to 6.5 per cent by the end of the year.

And in the worst case scenario, Australia would be plunged into a recession — and the tourism and manufaturing sector would worst off — if crude hit $US175 a barrel.

Deloitte points to a 8.3 per cent collapse in the air transport sector or about a loss of 150,000 inbound flights during the Christmas period.

The price of oil was as low as $US60 before the war, but soared as high as $US113 last week. On Monday, it was at $US105 a barrel.

Looking optimistically, even if the war were to end in June, the conflict has already caused damage to Australia’s economy. Growth is expected to halve to 0.7 per cent this year, and unemployment is set to rise more than five per cent, Deloitte said.

Pradeep Philip, lead partner at Deloitte Access Economics, warned the country was at the “doorstep of a recession”.

“No one can predict the severity and duration of [the economic shock]. If you look at the higher oil price scenarios where growth is hit and underlying prices go up, that is in stagflation territory,” he told The Australian Financial Review.

At the start of this month, Treasurer Jim Chalmers was grilled on the prospect of stagflation, which is a rare combination of soaring inflation, high unemployment and stagnant growth putting families under significant pressure.

“Australians didn’t choose this war. They’re paying the price for this war at the petrol bowser and more broadly,’’ the Treasurer said on April 1.

“From an economic point of view, this war can’t end soon enough, but the consequences will linger for longer.”

Asked if Treasury modelling predicted a recession, Dr Chalmers sidestepped the question.

“Well, we’re still working through a number of scenarios. There’s more than one alternative scenario to those that have been publicly released,’’ he said.

“And clearly, the more substantial the oil shock, the longer that the war drags on, the longer it takes for the global economy to get the show back on the road. Obviously, those are the key considerations in that modelling.

“The longer the shock drags out, the harsher the consequences for our economy, whether that’s measured by inflation or by growth or by impacts on the labour market.”

Australia last experienced sustained stagflation during the 1970s and early 1980s, triggered by global oil shocks.

Albanese secures fuel deal

Singapore will continue to supply Australia with refined fuels as long as oil supply remains steady, with Prime Minister Anthony Albanese leaving the door open to more domestic gas fields, should the Asian city-state require more supply.

The efforts between both countries to secure the reciprocal flow of fuel and LNG was a key priority for Mr Albanese and his Singaporean counterpart Lawrence Wong during the pair’s annual leaders’ meeting last Friday in the South-East Asian nation.

The Middle East conflict has sparked concerns about Australia’s supply if the war continues and in the event of another similar situation in the future.

Singapore provides more than half of the nation’s petrol, as well as 22 per cent of its jet fuel and 15 per cent of its diesel.

In return, Australia is Singapore’s second-largest supplier of liquefied natural gas, providing it with 32 per cent of its supply.

Marathon 21-hour talks end with no deal

The US and Iran held high-level peace talks in Pakistan over the weekend, but the two feuding nations could not come to an agreement.

“I think that’s bad news for Iran much more than it’s bad news for the United States of America,” Vice President JD Vance said before heading back to the US.

One of the key sticking points was Iran’s nuclear program, the very reason the conflict started in the first place, President Donald Trump previously said.

Mr Vance said US and Iranian officials could not come to an agreement.

“We need to see an affirmative commitment that they will not seek a nuclear weapon, and they will not seek the tools that would enable them to quickly achieve a nuclear weapon,” he said on Sunday.

“That is the core goal of the president of the United States, and that’s what we’ve tried to achieve through these negotiations.”

Other obstacles included Iran and Pakistan asking for the strikes on Lebanon to end amid Israel’s war with Hezbollah. The US and Israel disagreed.

Mr Trump has also repeatedly called for the Strait of Hormuz to be reopened, which it was briefly when the ceasefire was announced last week before Iran quickly closed it off again as Israel fired more missiles at southern Beirut.

Iran officials also said a non negotiable was the unfreezing of Iranian assets, after billions of dollars from oil sales were frozen in 2018 by Trump in his first term.

Mr Trump announced overnight the US would begin a sweeping blockade of the Strait of Hormuz, vowing to fight back against “WORLD EXTORTION” and ensure that no one paying tolls to Iran will get through the critical oil chokepoint.

He claimed that negotiations with Iran “went well”, despite no deal being made, and faulted the Islamic Republic for refusing to budge on its nuclear program and failing to open the strait – a condition of the two-week ceasefire currently in place.

The US Central Command said its forces will begin a blockade of all traffic entering and exiting Iranian ports from Tuesday.

It will not apply to vessels transiting the Strait of Hormuz to and from non-Iranian ports.