The Iran Conflict and Kiwi Finances

  By Chelsea Traver

It has been a challenging few months geopolitically, with the US and Israel continuing to escalate the conflict with Iran. Global markets were rattled, energy prices surged, and financial headlines were dominated by uncertainty. It was easy to get caught up in the noise and feel pessimistic, and then, almost without warning, global share markets rebounded spectacularly. They recovered from the sell-off and finished April at all-time highs.

What Happened

On February 28, the US and Israel launched surprise airstrikes on Iranian military and leadership targets, triggering retaliatory missile and drone strikes from Iran against US bases and Gulf allies. The conflict quickly spread beyond Iran's borders, disrupting air traffic, rattling global supply chains, and injecting enormous uncertainty into financial markets worldwide.

The single biggest economic shockwave has been energy. About 20 million barrels of crude oil and oil products per day normally move through the Strait of Hormuz, along with roughly one-fifth of global liquefied natural gas. Since the opening strikes, commercial traffic through the strait has been severely disrupted. Brent crude pushed above $110 per barrel by month-end, despite intermittent ceasefire efforts and diplomatic overtures that continued to break down.

Petrol Prices

This is where most Kiwis have felt the conflict most directly.

Higher oil prices mean higher prices for almost everything, from groceries to airline tickets to the cost of running a business. The IMF has warned that every 10% increase in energy prices is expected to push global inflation up by nearly half a percent.

Petrol here in NZ hit a record high in late April, though there has been some relief at the pump in recent days, down around 5% over the past month. However, experts warn any relief may be short-lived as global oil prices continue to climb.

We import over 90% of our refined fuel from Asian refineries in South Korea, Singapore, Malaysia and Japan, and those refineries source over three-quarters of their crude from the Persian Gulf. As the Strait of Hormuz tightens, those refineries compete harder for supply elsewhere, and we pay more at the pump. As Kiwibank chief economist Jarrod Kerr put it: "A spike in petrol prices acts like a tax on the consumer." Freight, food, fertiliser, even your morning coffee, all become more expensive when fuel costs rise.

On a more positive note, New Zealand and Singapore have just this week agreed to keep vital fuel supplies flowing in times of crisis, a significant step given how dependent we are on that supply chain.

Inflation and Economic Growth

The increase in petrol prices is already feeding through into higher inflation. US inflation rose 3.3% in the most recent reading, the largest monthly jump since April 2021. The New Zealand inflation data is not out yet but the next quarterly CPI (June 2026) is expected to be higher.

There is also a fertiliser risk for our farming sector. About 45% of global urea — New Zealand's most widely used nitrogen fertiliser — passes through the Strait of Hormuz. Urea prices have spiked sharply, and if they stay elevated, farm input costs and food prices at the supermarket will follow.

The Housing Market

For many New Zealanders, the biggest concern is what happens to house prices and mortgages. ANZ has reduced its house price inflation forecast for 2026 to just 2% (from 5% previously), citing headwinds in the form of weaker buyer confidence and upward pressure on mortgage rates as wholesale interest rates rise sharply.

On the mortgage front, things have moved quickly. BNZ has lifted three fixed-term mortgage rates by 10 basis points, its second round of hikes in two weeks, citing the oil crisis driving up inflation concerns. Across the market, regular fixed rates now start at 4.59%, while long-term fixed mortgages top out at 6.39%.

ANZ has brought forward its expectation for the first OCR hike to December 2026 and characterises the risks as skewed to even earlier than that. That said, a major crash in house prices remains unlikely. Most economists continue to expect a modest recovery from 2027 onwards once the energy situation stabilises.

The Share Market — Sell-Off, Then a Stunning Recovery

Global stocks fell sharply in the weeks after the conflict began. But that is only half the story. April proved to be the MSCI World Index's best month since November 2020, closing at a new all-time high.

The S&P 500 advanced 10.4% for the month — its best result since November 2020 — with the Nasdaq leading the way, up 15.3%. The S&P 500 underwent a 13-day rally to close at a new all-time high on April 24, advancing sharply following news of progress between the US and Iran.

The standout international performer was the MSCI Emerging Markets Index, gaining 14.7%, powered by extraordinary gains in Taiwan and South Korea — both key players in the global AI supply chain.

What drove the recovery? A strong start to earnings season and renewed enthusiasm around artificial intelligence underpinned the rally, even as the Strait of Hormuz remained severely restricted and oil stayed elevated. Investor sentiment shifted decisively risk-on, with equities largely decoupling from energy markets.

The NZ Energy Sovereignty Opportunity

New Zealand already generates around 85% of its electricity from renewable sources — one of the highest rates in the world. But this conflict has laid bare a critical vulnerability in our liquid fuel position. New Zealand is the only IEA member whose public oil reserves lie entirely offshore. In January, the country held just 38 days of onshore petroleum stocks. By comparison, countries such as Japan and South Korea hold around 200 days of reserves domestically.

The Iran conflict offers New Zealand a reframing opportunity: not just "drive an EV to save the planet," but "drive an EV and charge it from New Zealand's own rivers and volcanoes, so that no war in the Middle East can strand you at a petrol station." The acceleration toward electrified transport and domestic clean energy is not just good for the planet, it has become a matter of national economic security.

What Now?

It would be easy to feel overwhelmed. The headlines are concerning and the consequences for everyday Kiwis, at the pump, at the supermarket, and on mortgage statements, are very real. But the share market recovery tells a powerful story.

History shows that market recovery times have shortened considerably over recent decades. The 2026 Iran conflict recovery has taken just 11 days so far — one of the fastest on record. In 8 out of 10 major geopolitical events since 1980, markets were positive one year later, and after three years, markets were positive in every single case.

The distance between March's lows and April's record highs was measured in weeks — a reminder that the cost of reacting to uncertainty has consistently outweighed the discomfort of enduring it.