While we harp about who said what to whom in the parliament, we are forgetting the impact of the Iran-US conflict on our economy. The one thing that will make the world come down to its knees in the coming months is the supply of oil and its price.

The war in Iran has choked the world’s supply of oil to a “trickle,” the International Energy Agency said in a new report released on Thursday. According to the organisation, which tracks and helps set policy for the global energy sector, the widening conflict in the region has created an unprecedented disruption in the global oil market, one that will almost certainly force energy and other fuel-dependent costs to rise.

There will be no exceptions. Even our tiny island paradise, which relies on fuel to power the nation, will feel its impact. The authorities have been mum on how much fuel reserves we have and, in the case of a complete shutdown, how long we will survive. Despite what is said about renewable energy, our nation depends on fossil fuels. The question remains about how much reserves we have.

Australia and New Zealand both have official fuel reserve figures, which both governments have cited this week. Both figures deserve more scrutiny than they have received. In Australia, energy minister Chris Bowen told Parliament that reserves stood at 36 days of petrol, 34 days of diesel, and 32 days of jet fuel, the highest levels in 15 years. In New Zealand, the Minimum Stockholding Obligation, which came into force only in January 2025, requires importers to hold 28 days of petrol, 24 days of jet fuel, and 21 days of diesel onshore or in transit.

Diesel and jet fuel markets are particularly vulnerable to the war’s effects on Middle East fossil fuel production. The reason why Iran has such sway over fossil fuels has to do with a quirk of geology. The country sits on top of where the Arabian tectonic plate is smashing into the Eurasian plate. This continental collision gave rise to the Zagros Mountains, which push down on the Arabian plate in a way that has created a basin in Earth’s crust that traps hydrocarbons, hence, all that oil and gas. The region contains about 12 per cent of the world’s oil, according to one 2024 estimate.

Around a fifth of the world’s shipments of oil and liquid natural gas pass through a narrow stretch of sea called the Strait of Hormuz, which separates the Persian Gulf and the Gulf of Oman. Iran effectively controls the strait, and when the US and Israel ignited the war on 28 February, Tehran closed the waterway down.

Global oil supply is set to drop by eight million barrels a day in March, the IEA said, while liquified-natural-gas- and gasoline-making facilities in the region have also basically ceased production. The loss of oil will be offset somewhat by the decision of the IEA’s 32 member countries to release 400 million barrels of oil from their emergency reserves—the largest ever disbursement of its kind in the organisation’s history, but only just enough to cover a few weeks’ worth of lost Strait of Hormuz shipments.

Air New Zealand has already indicated higher fares, and if the situation continues, other airlines will join in. The shortage in fuel supply will lead to higher fuel prices, which means that everything around us will cost more.

Hopefully, the government has a plan to absorb the shocks and is working behind the scenes to come up with a contingency plan.

Have a great weekend.