With everything going on in the Middle East right now, you may be wondering what it means for your business – and whether there’s anything you should be doing. A few clients have been asking us just this.
Events of this scale naturally ripple through markets like a stone dropping in a pond, creating flow-on effects for businesses.
Quick overview: the war is mainly hitting our shores through higher fuel prices, renewed inflation pressure and uncertainty in trade and financial markets. This is squeezing margins and demand for SMEs.
Here’s a closer look at what’s happening, with some practical actions you might consider taking to protect your business.
The real economic fallout
The civilian fallout from this conflict has been absolutely devastating. But the economic fallout from global to local has also been tough.
Halted supply, soaring oil
Oil has spiked from around the mid‑US$60s to above US$100 a barrel on fears about disruption in the Strait of Hormuz and Red Sea, lifting global fuel and freight costs.
Increase in local fuel prices
We import more than 90% of the fuel we use here in Australia, so local petrol and diesel prices move quickly with global oil and the US dollar. We’re already seeing hikes of $0.30–$0.50 per litre at the pump.
Rising costs, slower growth
In severe scenarios – think prolonged risks in the Strait of Hormuz and Red Sea – Westpac say this conflict could push inflation up by 0.7–1.5 percentage points over the next year. Higher energy costs are also likely to limit GDP growth by up to 0.5 points by the end of 2026, as they squeeze spending and trade.
Interest hikes up borrowing costs
The market expects a full interest rate increase by May, and another two hikes by November. Bond yields – essentially the government’s borrowing cost – have already risen by 0.35% (35bps), which is pushing up finance costs.
Immediate impact on Aussie SMEs
These economic repercussions of the Middle East crisis are already having a negative impact here on the ground:
- Fuel-heavy businesses are hurting – Tradies, transport, logistics, construction, and agriculture are paying much more for petrol and diesel on top of already high prices.
- Everything costs more – Higher fuel and shipping push up the price of food, fertiliser, packaging, imports and anything that travels by truck or ship.
- Tighter margins – Small businesses with tight cash flow can’t pass on costs as easily as big companies, so profits get squeezed.
- Customers reduce discretionary spend – Households will feel cost-of-living pressure from fuel, energy and food price rises, causing them to cut back on discretionary spend. This will hit retail, hospitality, tourism and personal services businesses hardest.
- Future rates cut less certain? – Though rising borrowing costs aren’t the main story right now, market volatility and inflation risk make future cuts less certain, keeping financing relatively expensive.
How are we feeling about it?
Before the Middle East conflict (Jan–Feb 2026), Business NSW data showed business owner confidence sliding, with hiring freezes and rising cost burdens already pinching SMEs.
Since the escalation, NAB surveys show sentiment stuck at a cautious 7 – owners are now outright pessimistic, especially in fuel-heavy and discretionary sectors. Rising energy costs have jumped to the top of concern lists, outweighing insurance or compliance worries.
Is any government support available?
On 13 March, our government announced it was releasing over 762 million litres of petrol and diesel from domestic fuel reserves to fix shortages brought on by the Middle East conflict – mainly to support rural and regional areas.
The government isn’t expected to roll out specific financial relief for businesses any time soon. Current measures are mainly focused on boosting supply and monitoring the situation, rather than providing direct support for SMEs.
- The Australian Competition and Consumer Commission (ACCC) is keeping an eye on fuel prices to stop price gouging, but it can’t stop real global cost jumps hitting the pump.
- Some states are adding protections for consumers. For example, Victoria’s Fair Fuel Plan makes retailers show a daily price cap and only lower prices during the day. This is good for transparency, not for the base cost.
- Fuel tax credits for eligible businesses still offset diesel and petrol costs for heavy vehicles and off-road use. But not all SMEs qualify, and credits lag sudden spikes. Explore on business.gov.au
While regulators and state rules improve price transparency, us small businesses are still exposed to the reality of global cost pressures.
Actionable advice for small businesses
While we all continue to feel the unease, here are some practical actions we suggest you might want to consider to keep yourself in a good financial position:
- Budget smart – Plan for higher fuel, freight, and input costs through 2026. Update cash flow forecasts and pricing, and stress-test for 20–30% hikes.
- Check your contracts – Review delivery, fuel levy, and indexation clauses in supplier and client contracts so you’re not locked into uneconomic rates if fuel stays elevated.
- Price and package wisely – Make small, frequent price tweaks rather than big jumps, and consider lower-cost product or service bundles to protect margins.
- Cut where you can – Identify non-essential expenses and delay big purchases that aren’t urgent; every little saving adds up.
- Lock in suppliers – Where possible, secure fixed-price contracts for key inputs or fuel to reduce exposure to sudden spikes.
- Build a buffer – Increase cash reserves where possible so short-term shocks don’t force rushed decisions.
- Communicate with customers – Be transparent about cost pressures and any small price changes; it builds trust and keeps loyalty.
- Review financing – Check your loan terms and consider refinancing or negotiating interest rates before hikes hit harder.
- Track metrics – Keep a close eye on margins, cash flow, and input costs weekly rather than just monthly.
See also: How to maximise profits in your business with cost management
Control what you can: managing your business
The situation overseas may be out of our control, but what is in our control is how we manage our businesses.
Smart planning, keeping an eye on costs, and taking practical steps now can help protect your margins and maintain stability, even when the world feels shaky. Let’s hope the tensions ease soon.
