On July 28 (local time), Australian Treasury Secretary Jim Chalmers warned that escalating tensions in the Middle East are posing a significant threat to global inflation, as the world is increasingly lacking room to respond to oil supply shocks.
According to Xinhua, Mr. Chalmers has released the Australian Treasury Department's assessment, which stated that the global economy currently has "less room" to absorb oil supply shocks caused by the Middle East conflict.
The report said that the oil price shock when the conflict broke out in February was partly controlled by adjusting export routes and using oil reserves. However, the reserves of many countries have now decreased significantly, making the ability to respond to new disruptions more limited.
Talking to local media, Mr. Chalmers said that Australians have suffered significant economic impacts from the conflict that took place thousands of kilometers away.
Recent escalating tensions in the Middle East pose a significant threat to global inflation. There is still much uncertainty about this conflict as well as the costs and consequences it may cause," he said.
According to the Australian Treasurer, from an economic perspective, a long-term early end to the conflict will benefit the global economy.
The simulation of risk scenarios included in the Australian federal budget estimate for the 2026-2027 period also warned that if the conflict in the Middle East continues to escalate seriously, oil prices could exceed 200 USD/barrel in the third quarter of this year.
This scenario also forecasts that Australia's annual inflation may increase to 7.25%, putting more pressure on living costs and monetary policy.
Meanwhile, the Australian Bureau of Statistics is expected to release June inflation data on July 29. Westpac Bank - one of Australia's 4 largest banks - forecasts that the country's overall inflation will increase from 4% in May to 4.2% in June.
Investors will continue to monitor developments in the Middle East as well as the upcoming inflation data to assess Australia's monetary policy outlook in the near future.
