A massive surge in EV sales was one of the first economic impacts to come from the conflict between the US and Iran.
Enquiries for EVs tripled From February to March 2026 amid rising fuel prices and fuel shortages.
Higher prices at the pump are affecting the cost of transporting goods, with flow-on impacts to industries such as manufacturing, construction and agriculture. This has added to the inflationary pressures already seen across the economy, contributing to the RBA’s decision to increase the cash rate.
Inflation Expectations
The ‘2-year ahead inflation expectations’ have increased to 6.9%, higher than during the peak of the cost-of-living crisis, underlining the impact of the Middle East conflict.
However, recent surveys by both Roy Morgan and NAB point to declining business confidence even before the start of the Middle East conflict.
With the RBA considering further cash rate increases in the months ahead, Australian businesses will need to hold their nerve and make savings where possible.
Renewable Energy Projects
Commonwealth Bank economists say higher energy prices are expected to lift inflation, slow growth and push unemployment modestly higher over the next two years.
Business investment is expected to be more resilient, boosted by tailwinds like data centre investment and renewable energy projects.
Looking further ahead, CBA economists say they expect interest rates to be cut in 2027 as inflation moderates and economic conditions soften.