Why the alarm: Oil shock hits consumer budgets hard
At the heart of the crisis is oil. Global prices have climbed above US$100 per barrel following disruptions to the Strait of Hormuz, a critical shipping route handling roughly 20% of global oil supply.
As a near-total fuel importer, New Zealand has no buffer against such price shocks – petrol costs are rising rapidly and could approach $4 per litre if hostilities worsen.
Kiwibank chief economist Jarrod Kerr (pictured) says the most immediate impact is rising petrol prices, which particularly hurt lower-income households forced to drive to work. Kerr described it as “just another cost that they have to wear” after three years of cost-of-living strain.
Consumer behaviour is already shifting – families are postponing big-ticket purchases, choosing budget alternatives, and reducing travel. For mortgage advisers, this translates to clients facing tighter budgets and reduced borrowing capacity, complicating lending decisions precisely when many had hoped economic conditions were finally improving.
Inflation and growth on collision course
That cautious optimism has now given way to genuine concern about a dangerous combination: rising inflation alongside slowing growth. The Reserve Bank only reached stimulatory interest rate settings in November, raising hopes for recovery in 2026. But those expectations have been derailed by geopolitical upheaval.