The Middle East conflict has pushed crude oil above $US105 a barrel and widened the diesel “crack spread” to $69 from $24, boosting refinery margins. Australia, which imports about 80% to 90% of its diesel, is particularly exposed to price swings that are cutting into farmers’ profitability. Higher transport costs are also feeding inflation pressures, with the risk that cost increases spread more quickly through supply chains to the wider economy.

Fresh signs of disruptions to Saudi crude supply sent oil prices sharply higher, with Brent futures up 2.6% to $US108.39 a barrel and WTI futures up 4% to $US105.45. The move weighed on US equities, extending losses across the major indexes. The Dow fell 0.6%, while the S&P 500 and Nasdaq Composite slipped 0.5% and 0.8%, respectively.

Reserve Bank of Australia deputy governor Andrew Hauser said inflation is the economy’s “one big problem,” with markets fully pricing a September cash-rate increase to 4.6%, a 15-year high. Traders are also factoring in what is seen as a near certainty of two more hikes by February. Analysts say current inflation pressures are being driven largely by supply disruptions linked to the U.S.-Iran conflict and a surge in AI spending by major U.S. technology companies. They argue rate rises are poorly suited to addressing those supply-side forces.

Wall Street snapped a slide on Friday, with the S&P 500, Dow and Nasdaq each up about 1%. After August inflation came in hotter than expected, markets lifted the probability of a 25-basis-point Fed rate increase this week to about 90%. Separately, an attack on a Saudi oil pipeline threatened roughly 4% of global crude supply, potentially pushing oil prices higher and adding to inflation pressure.

Australian shares are set for a modest rebound after falling to a six-week low on Tuesday, with ASX futures up 0.2% this morning. The earlier decline followed reports that Iran-backed Houthis attacked Saudi energy facilities. Markets are pricing a roughly 70% chance of an interest rate hike later this month. Central bank officials say inflation remains the main challenge, with high living costs and rising rates continuing to squeeze households.

Reserve Bank of Australia Deputy Governor Andrew Hauser said the public is angry about elevated inflation and warned interest rates could rise further if price pressures remain high. The cash rate is currently 4.35%, and headline inflation rose to 3.5% in the year to July. The RBA projects inflation will not return to its target range until early 2028. The central bank’s board is scheduled to meet at the end of September to decide whether to hold or move rates.

Negotiations over a new power contract for Tasmania’s Bell Bay aluminium smelter remain deadlocked, with Hydro Tasmania and Rio Tinto about $60 million a year apart, or $600 million over 10 years. The federal government’s $2 billion green aluminium credit scheme is not due to begin for two years, and the state government’s push for support has so far failed. Separately, an EY report found a related company loaned $191 million from the manganese smelter business to other GFG Alliance entities, deepening concerns about financial fragility. Residents and local groups fear that if the aluminium smelter closes, George Town’s economy could be severely hit.

Gas from Australia’s Beetaloo Basin has begun flowing to Darwin, and Jemena has outlined a plan to build a 400-kilometre pipeline connection to the Northern Gas Pipeline (NGP), the only route linking Northern Territory gas to the east coast. APA Group has also begun environmental assessment for a proposed 1,500-kilometre pipeline that would run directly from Beetaloo to southwest Queensland. Both projects would require environmental approvals from the Queensland, Northern Territory and federal governments.

U.S. thrift retailer Savers Value Village is expanding in Australia, prompting concern from local charity shops that rely on donated goods to fund community programs. Savers has opened 19 stores in the country, while its parent company SVV has a market value of $2.2 billion and a 50 per cent gross profit margin, well above the industry average. Savers said it paid its Australian nonprofit partners $5.6 million last year to address criticism. The global secondhand fashion market is projected to reach $444 billion by 2027.