Impact of the US-Iran Conflict on New Zealand's Economy and Air Travel

The ongoing conflict between the United States, Israel, and Iran has led to significant fluctuations in global oil prices, directly impacting jet fuel costs. As of February 20, jet fuel prices rose by 2.2% to $95.95 per barrel, with the crack spread—an indicator of refining margins—reaching $24.48 when Brent crude was priced at $71.47. The International Air Transport Association (IATA) noted that the crack spread had previously surged above $60 during the early months of 2022, following Russia's invasion of Ukraine. Airlines, particularly those in the Middle East, often do not hedge against these price increases, relying instead on government support due to their substantial oil reserves.

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The conflict has also caused operational disruptions in air travel, particularly affecting airlines operating in and out of the United Arab Emirates. Following Iranian attacks on airports in Abu Dhabi and Dubai, Emirates Airlines suspended all operations to and from Dubai, resulting in the cancellation of approximately 70.5% of flights from the UAE. The Airports Council International (ACI) has called for solidarity and support for airport personnel amid these challenges, emphasizing the need for civilian infrastructure to remain protected from military actions.

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The conflict's ripple effects extend beyond aviation, impacting New Zealand's economy, particularly in fuel prices and exports. The Automobile Association (AA) has warned that New Zealand will not be exempt from rising fuel prices, as approximately 20% of the world's oil supply transits through the strategically vital Strait of Hormuz. Terry Collins, an AA spokesperson, highlighted the risks associated with transporting oil through this narrow passage, which could lead to increased insurance costs and ultimately higher prices at the pump.

US-Iran conflict: Will fuel prices go up in New Zealand?

Prime Minister Christopher Luxon stated that New Zealand's fuel supplies remain secure, with a 28-day stockpile available. However, he acknowledged that the situation requires close monitoring, especially as oil prices have already seen a notable increase. The Labour Party has criticized the government's reliance on imported liquefied natural gas (LNG) and called for greater energy independence.

Oil, LNG and KiwiSaver: What the US–Iran conflict could mean for NZ’s economy

The Meat Industry Association (MIA) has expressed concerns that the conflict could disrupt New Zealand's red meat exports to the Gulf Cooperation Council (GCC) countries, valued at $298 million in 2025. While exports to Europe and Britain remain unaffected, congestion and delays are anticipated for shipments to the GCC if access through the Strait of Hormuz is compromised. Dairy exports, another critical sector, could also face challenges, as the Middle East is a significant market for New Zealand's agricultural products.

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Officials have reiterated that New Zealand's economic security remains a priority. Finance Minister Nicola Willis emphasized that the Treasury and Reserve Bank are closely monitoring developments, while Labour leader Chris Hipkins criticized the government's energy strategy, advocating for a shift towards renewable sources.

Oil, LNG and KiwiSaver: What the US–Iran conflict could mean for NZ’s economy

There are discrepancies in the assessment of the conflict's immediate impact on New Zealand's economy. While some officials suggest a muted market reaction, others warn of potential inflationary pressures if oil prices remain elevated. The situation continues to evolve, and the full extent of the economic implications remains uncertain.

Oil, LNG and KiwiSaver: What the US–Iran conflict could mean for NZ’s economy

• “We stand in solidarity with our colleagues at airports across the region, who in the face of uncertainty and operational pressure, continue to respond with professionalism and compassion to support affected passengers, airlines, personnel and communities.” — Airports Council International

The New Zealand Herald

• “It’s a vicarious impact… so regardless of whether we get the oil from Singapore, Korea, or Japan… we’re all looking to buy the same fuel, and so the price will go up.” — Terry Collins, AA Spokesperson

US-Iran conflict: Will fuel prices go up in New Zealand?

• “From an economic security perspective, New Zealand has very good fuel supplies,” — Nicola Willis, Finance Minister

Oil, LNG and KiwiSaver: What the US–Iran conflict could mean for NZ’s economy

• “If Hormuz is closed, congestion and delays will primarily impact chilled exports to the Middle East, which were worth $166m last year.” — Meat Industry Association Spokesperson

Newstalk ZB

The ongoing conflict between the US, Israel, and Iran continues to pose challenges for New Zealand's economy, particularly in terms of fuel prices and export stability, necessitating vigilant monitoring and strategic responses from government officials and industry stakeholders.

Oil, LNG and KiwiSaver: What the US–Iran conflict could mean for NZ’s economy