RBA now twice as likely to hike interest rate as US-Iran war drives fuel prices higher

Economists warn another prolonged closure of the strait of Hormuz as a result of renewed US-Iranian conflict could force the Reserve Bank of Australia to raise interest rates. Photograph: Reuters View image in fullscreen Economists warn another prolonged closure of the strait of Hormuz as a result of renewed US-Iranian conflict could force the Reserve Bank of Australia to raise interest rates. Photograph: Reuters RBA now twice as likely to hike interest rate as US-Iran war drives fuel prices higher Experts warn global energy market at a ‘critical juncture’ with escalating Middle East crisis expected to further drag on a slowing Australian economy Follow our Australia news live blog for latest updates Get our breaking news email , free app or daily news podcast The likelihood of a Reserve Bank interest rate hike has doubled according to market forecasts, as the escalating Middle East crisis once again drives fuel prices higher amid dwindling global oil reserves. The total breakdown in the fragile ceasefire between the United States and Iran has sent the international Brent crude benchmark surging by 23% over the past two weeks and back within reach of $US90 a barrel. As experts warn the global energy market is now at a “critical juncture”, Australian motorists are once again faced with climbing fuel costs, albeit without the panicked buying and accompanying shortages that accompanied the start of the US-Israel war on Iran in early March. Diesel, which has consistently been most exposed to the global disruptions, has jumped by 40 cents in July to about $2.10 a litre in the major cities on the east coast, according to Motormouth. US launches 10th round of strikes as Iran says it is in ‘full-scale war’ Read more The removal of some of the federal government’s fuel excise relief from the start of this month has also contributed to higher costs, with unleaded petrol up by 25 cents to about $1.75. Amid already depleted global oil stockpiles, analysts warn of a coming tipping point after Iran’s leader declared “full-scale war” with the United States and Houthi rebels threatened to blockade millions of Saudi Arabian oil passing through the Red Sea. Luke Yeaman, the CBA’s chief economist, said a total lack of trust between the warring parties made it difficult to judge the trajectory of the escalating conflict, which he said would send a fresh stagflationary pulse through the Australian economy . Sign up for the Breaking News Australia email “In the current dynamic, we believe this will drag on for at least several weeks and possibly longer,” Yeaman said. With inflation already tracking too high for comfort, traders in financial markets are upping bets that the Reserve Bank could be forced to hike rates for a fourth time. Markets now place a nearly 30% chance of an interest rate rise on 12 August, up from 16% two weeks ago. The probability of a hike by November has doubled to 80% over the same period, according to ANZ. Yeaman said he was sticking to his fo