The decision by the United States and Israel to attack Iran in February 2026 reportedly was a surprise to America’s allies (Israel excepted). Irrespective of the calamities the war may visit upon its intimate participants, the rest of us will suffer consequences from this war.
The consequences are, superficially, restricted and more expensive oil and gas supply.
Given we are all hydrocarbon addicts, this is going to hurt.
But, we have been here before.
Let’s travel back in time: not far, just to the mid-20th century for some prequels and context.
1973 Oil Crisis
Conflict and war in the Middle East, between Arabs and Israelis, has existed since Israel’s declaration of independence in 1948. One war, the Six-Day War of 1967, begat the 1973 Yom Kippur war which was the catalyst for the Organization of Arab Petroleum Exporting Countries (OAPEC) to cut production of oil and place an embargo on oil exports to the United States in response to President Nixon requesting support for Israel in the war as a retaliation for the Soviet Union supporting Syria and Egypt wage war against Israel. The embargo on exports to the United States lasted only until January 1974, though the price of oil remained high afterwards.
This 1967-1973 bout of Middle East war needs to be seen against the context of global ‘peak oil’ concerns. In the period 1966 to 1974, it appeared that the world had encountered ‘peak oil’ production. The United States and Venezuela peaked in 1970, Canada and Iran in around 1974. This had the effect of putting upward pressure on the oil prices which in turn caused inflationary and other problems for high consumption and manufacturing countries including the United States and Germany.
So, the Six-Day war precipitated the 1973 ‘oil crisis’. The oil shortage the United States experienced was exacerbated by the OAPEC embargo. However, many countries saw the United States’ actions to support Israel as causing the oil embargo, which presented the long-term possibility of embargo-related high oil prices, disrupted supply and recession. One outcome was strong rift within NATO, which we are seeing again in 2026 as a consequence of the United States’ attack on Iran.
By 18 January 1974, the United States had negotiated an Israeli troop withdrawal from parts of the Sinai Peninsula, and the prospect of a settlement between Israel and Syria convinced Arab oil producers to lift the embargo in March 1974.
The 1973 Oil Crisis and associated ‘oil price shock’, along with the linked 1973-74 stock market crash, have been regarded as the first event since the Great Depression (1929-1939) to have a persistent adverse economic effect including stagflation, which is persistent high inflation coupled with high unemployment and stagnant domestic demand.
1979 Energy Crisis
The Shah of Iran, a client of the United States, fled Iran in early 1979 in fear of his life. Mass protests against the Shah’s repressive regime triggered his departure and resulted in the collapse of Iranian oil production. The Shah was replaced by another repressive regime, led by the Shia theocrat Ayatollah Khomeini, who established the regime that the United States and Israel attacked in February 2026. Through 2025 and 2026 mass protests in Iran were brutally suppressed by the theocracy, but at the time of writing had not, as in 1979, succeeded in bringing down a regime that murders thousands of its own citizens.
The decline of Iranian oil production in 1979 did cause a spike in oil prices, though the loss was only about four percent of global production. However, with the 1973 crisis in mind, widespread panic resulted, driving the price of oil far higher than would be expected under normal circumstances.
Then, in 1980, Iraq invaded Iran resulting in Iranian oil production being severely diminished for the duration of the war due to Iranian attacks on oil production infrastructure. The war ended in 1988.
Finally, add to the mix Iraq’s 1990 invasion of Kuwait, and subsequent United Nations-endorsed military operations, led by the United States, against Iraq’s occupation resulting in the liberation of the Kuwaiti government. The Iraqis, as they retreated, set fire to over 600 Kuwaiti oil wells.
Lack of oil will roil economies
History shows us predictable outcomes of this war with Iran. Oil and gas supplies will be constrained resulting in immediately higher prices, supply shortages, damaged economies, and stressed consumers.
Because hydrocarbons underpin modern economies and societies, despite decades of efforts towards increasing global renewable energy capability, the elevated oil and gas prices, and attendant shortages, will inflict significant harm. Hydrocarbons do more than power vehicles. Hydrocarbons are integral to our lives.
Harm now will be different to the harm of the 1970s because the world has changed, making life more dependent on oil and gas.
Here are some markers to illustrate why it will be different ‘this time.’
- 1979 global population was 4.36 billion people. In 2026 it is 8.3 billion people, hence there is more demand.
- On global aviation, modern aircraft (2026) are more efficient than their 1979 counterparts (up to 28 percent more efficient), however total fuel consumption has increased at a rate of about 6 percent per annum because of increased demand. Aviation consumes about eight million barrels per day.
- 1979 global energy consumption was estimated as 88,300 TWh (oil 37,178TWh), in 2024 energy consumption was estimated to be 186,383 TWh (oil 55,292 TWh)[1].
- Renewable energy consumption was negligible in 1979 (less than 7TWh) whereas it is estimated as 33TWh in 2024, contrasted with oil and gas combined being 51,000 TWh in 1979 and 96,000 TWh in 2024 (if you add coal then a total of 142,000 TWh comes from hydrocarbons from a total of 186,383 TWh).
- 1979 oil price peaked at US$39.50 per barrel (approximately US$176.00 today) – with oil trading at about US$110.00 per barrel in March 2026. There is precedent the price will increase as the war continues and in a lengthy aftermath.
- 1979 saw the Australian sharemarket established with the All Ordinaries index set at 500 with a value of A$35 billion (A$156 billion in 2026 dollars). In 2026 the All Ordinaries / ASX 200 is circa 9,000 points with a value of A$2.7 trillion.
- In 1979 there was no compulsory superannuation in Australia. In 2026 Australians have about $A3 trillion in superannuation directly exposed to the Australian sharemarket and global (mostly United States) sharemarket. Share prices have fallen as a result of the Iran war and will remain depressed as ‘second order’ effects take hold of sharemarket prices, adversely impacting Australians’ wealth, economic activity, and wellbeing.
- There was no internet, nor mobile telephones, nor electricity-hungry data centres enabling AI in 1979. Now these are ubiquitous and essential to economic activity and for personal life. They all rely on stable and plentiful electricity supply, the price and availability of which will be strained as a consequence of the war.
The idea that it may be different ‘this time’, that the consequences for degraded oil production and availability may be worse than seen in the 1970s, has been flagged by many oil industry analysts.
The closing of the Strait of Hormuz, the key supply chain chokepoint, is significant but that situation could quickly change. But the Strait is not just key for oil. It is key for the supply of fertilizer and other petrochemicals needed to enable myriad other industries and productions.
The more significant development has been the destruction of oil and gas production facilities. Israel’s 19 March 2026 attack on the South Pars gas field, the world’s biggest natural gas field operated jointly by Iran and Qatar, drove Iran to launch a missile attack against the world’s largest liquefied natural gas (LNG) export facility in Qatar. That attack sent oil prices up to almost US$120 per barrel. The CEO of QatarEnergy told media, in the wake of that attack, that 17 percent of production capacity has been lost and will take five years to rebuild.
The head of the International Energy Agency (the IEA) told the UK press on 20 March that the war represented the greatest threat to global energy supply “in history” and that financial markets are underestimating the consequences of the diminished oil and gas supply for the global economy. The amount of oil and gas rendered unavailable to the global market could be similar to the amount of decreased demand in 2020 during COVID, but with no decrease in demand as was the case during COVID.
The economic effect of the war with Iran, in terms of global oil and LNG pricing and availability, the IEA believes could be deep recession, and possibly a depression.
What about the Commonwealth Government providing support and solutions?
Given the differences between 1979 and 2026 listed earlier in this article, there is a case that the consequence of an oil shock, an energy crisis, in 2026 will be more significant than in the 1970s.
This greater significance, which we should understand as a greater harm, rests on a comparative increased demand for oil and gas, the decreased reliability of baseload electricity generation due to ‘green’ energy to fill the energy void, and the expanded pool of services and products that rely on hydrocarbon production from oil refining.
In reality, the lives of over 8 billion people and the operation of global trade in food, goods, and services are more reliant on oil and gas than at any time in human history. And the mullahs leading Iranian theocracy have shown a suicidal fixation of continuing the Shia theocracy even if that means ‘burning down the house’, or more particularly disrupting and degrading a significant portion of global oil and LNG production.
Given the magnitude of a likely global crisis, we must consider how the Commonwealth Government might be placed to deal with an oil crisis, and the cascading consequences, in 2026.
Spoiler alert – it does not look good!
Dependence on imports
In 1979 Australia was almost self-sufficient in oil refining and production of petroleum products, with up to 10 oil refineries operating. In 2026 Australia has two oil refineries operating, yielding about 20 percent of domestic needs with over 90 percent of required product imported. These last two refineries are surviving on Commonwealth subsidies until 2027 to ensure some local production capacity.
Too much debt
In April 2006, the Commonwealth Government had no net debt. In 2026 the Commonwealth Government is more than A$1 trillion in debt, with most state and territory jurisdictions also deeply indebted. There is little or no capacity for (responsible) emergency borrowing given the high debt, low productivity, constrained economic capacity, record government spending (with the exceptions of COVID and World War II), high inflation, and increasing domestic interest rates.
Commonwealth atrophy
Over the last two decades all Commonwealth governments have run Australia’s sovereign capabilities down. Australia remains, from the time of its known discovery by Europeans in 1606 up to today, a huge prize poised in solitude in the southern oceans.
However, in 2026 we find Australian capabilities to be vestigial – military forces, social coherence, energy policy, manufacturing, defence industry, public policy, economic management, and disciplined public spending are all ghosts of their former selves. Decades of mismanagement along political (and emerging identity) fault lines have stifled the dynamism and world-leading social and economic achievements made by Australia in the mid nineteenth century and the decades of the latter 20th century.
Accordingly, the Commonwealth is less capable to help our society in a crisis and Australia does not have the industry and resources to defend its sovereignty. It may be that COVID was the last vestige of Commonwealth beneficence that was financially possible.
Social fracture
Australian society has suffered significant fractures since the beginning of the 21st century. The 1970s multicultural policy introduced by the Whitlam government can be assessed in 2026 to have succeeded in some ways but overall has not yielded a unified idea of an Australia that all native-born Australians and migrants can coalesce about.
The long march of the political left, beginning in the 1960s, through Australia’s education, legal, government, and social institutions has fragmented society and provided a breeding ground for serious civil decay including the anti-Zionist and antisemitic activism in the wake of Hamas attack on Israel in October 2023. The political class has normalised pandering to ethno-religious sectors in the community, at the clear expense of others. We are amidst a nadir in Australian politics.
Consequences that are more than superficial
At the beginning of this article I described the consequences of war with Iran to be, superficially, restricted and more expensive oil and gas supply.
If only the consequences were so one dimensional.
A straightforward bump on fuel prices at the bowser is bad. But what stems from that?
Given the pervasiveness of oil and gas in human activity we can forecast that the longer the war with Iran continues, resulting in restricted flow of oil and LNG, coupled with any further destruction of refining and shipping capabilities, the more degraded the economy and the society will become.
Problems, now and foreseeable
Here are some problems, which are more than superficial, that we are already seeing in Australia.
Bowser prices for petrol and diesel have increased by more than 30 percent in a few weeks, and will likely go higher.
Airlines have increased airfares.
Incoherent comments and lack of effective action from the Commonwealth Government. For example, the Government in three days in March 2026 went from a position of ‘there is no crisis’ to ‘there is a crisis’ advising people and business that they should strive to save fuel and reduce electricity consumption.
Australia’s below international recommended standard of fuel reserves, a problem that has festered through a succession of governments, affords Australia only about 30 days supply. On the current trajectory of the war, fuel rationing is likely to occur in a matter of weeks.
Farmers are victims of people stealing diesel from farm machinery at night, in response having to waste more time and fuel to move machinery each evening to protected locations. Farmers either cannot buy fertilizer or are paying exorbitant prices for it which is likely to reduce food production.
AdBlue for diesels is in short supply. This will restrict a significant proportion of Australia’s road transport and mining capability.
Many companies are adding a fuel levy to transport costs which means food and goods will have to increase in price, adding to already significant cost-of-living pressures on people.
The Commonwealth Government during COVID provided support payments because of the government mandate to ‘lock down’. There is no such mandate stapled to an energy crisis – businesses and people should not expect government support, noting that most Australian governments are now so debt-ridden that they may not be able to offer support.
The Reserve Bank of Australia has recently increased interest rates in response to inflation increasing. The cost of fuel will drive up inflation. On 23 March 2026 pundits suggested there could be three more rate rises in 2026, beginning as soon as May. Many consumers will experience further decreases in their disposable income which in turn will slow the economy. If it slows too much then unemployment is likely to increase.
Consequences for people and for employers
Of course, all these macro factors ultimately impact each person.
For operators of all businesses, and especially for owners and operators of Australian critical infrastructure entities, they must be attentive to how these geopolitical issues impact their employees, suppliers, and operations. Critical infrastructure entities with obligations under the Security of Critical Infrastructure Act 2018 (SOCI Act) must be attentive to personnel security, cyber and information, supply chain issues as set out in their Critical Infrastructure Risk Management program (CIRMP).
The current brace of geopolitical risks includes ongoing wars in the Middle East, war with Iran, degraded global oil and gas supply, the first and second order consequences of restricted oil and gas supply, domestic cost-of-living crisis, social fracture driven by activists and hostile intelligence services, and more. All weigh on the shoulders of employees and contractors.
Further, the war with Iran is set against the backdrop of ongoing war in Europe, Chinese posturing around Taiwan, U.S.-induced global tariff and trade wars, the significant diminution of the stockpile of U.S.-produced missiles and other advanced munitions (which will take years to be replenished and on which many of the Western democracies depend), increased threat of terrorism, and significant social and political fracture in Australia induced by geopolitical drivers and home-grown issues including the 2025 Bondi Beach terror attack and associated religious faith-based social and political manoeuvrings.
The consequences are that all these drivers will impact on Australia’s workers – citizens and migrants. They attend the workplace as their ‘whole person’. They bring to work, in the form of their workplace behaviour and actions, the matters that impact them in their private lives. They may behave through the prism of their political or religious views.
Given this barrage of attritional consequences stemming from the war with Iran, atop the socio-economic pressures and scars from 2020 with COVID to the current backdrop of crises and stressors, many people will be now at breaking point, with more to follow.
Perhaps indicative of this trend, and showcasing a key vulnerability across Australia’s workforce, on 23 March 2026, Australian media reported that national-level data collected and analysed by Suicide Prevention Australia identified a significant increase in ‘distress’ amongst employees. It found that employees in medium-sized enterprises reported ‘extreme’ distress in 30 percent of cases. Some 90 percent of those surveyed reported some level of “work-related distress”. These trends were particularly prevalent amongst Millennials which reported 95 percent extreme workplace distress whilst 25 percent of Gen Z workers reported extreme distress.
Whilst one survey can only ever be emblematic, it lands at a time of recognisable community fracture, economic stress, global uncertainty, and fear. This state of distress will be compounded by the likely impacts of war with Iran and the aftershocks from it.
Suggestions for employers
First, employers must be alive to the risks posed by the current geopolitical conditions. Understand that ‘business-as-usual’ for many components of the post 1945 global rules-based operating system including globalised supply chain, international rule-of-law, social compact, military status quo, and reduced threat of large-scale war are extinguished. Do you need to change any operational settings?
Second, appreciate that Australia is vulnerable. Australia is no longer buffered by its geography from the worst excesses of other nation states. What crisis planning and business continuity arrangements are in place? Do not expect government to provide anything more than words.
Third, resolve to act in response to unfolding events.
Fourth, review how well you understand the workplace behaviour of your workforce – employees and contractors. Do the systems in place effectively detect aberrant behaviour? Do you need to change the settings of both IT-based and human systems in the face of current and foreseeable events that may drive aberrant workplace behaviour? Do settings offer support to workers? Can you detect and mitigate insider threat?
Fifth talk with your suppliers to explore possible remedies to business disruption and strive to agree what might be done.
In closing
For Australia and its citizens the world is a more perilous place now than at any time since World War II. However, during the War there were no truly existential threats to Australia as a sovereign state and to its inhabitants in terms of their way of life.
The world is different now and Australia is vulnerable. We are vulnerable because our governments and society have, for decades, acted in their own interest.
We are vulnerable because we have forgotten, or never learned, history and so understood what it can teach us. Politically and socially, modern Australia was established as a ‘commonwealth’ which is the 15th century English term for a political community founded for the common good. The noun “commonwealth”, meaning “public welfare, general good or advantage”.
Geopolitical risk factors now drive Australians to try and rekindle the spirit of an Australian commonwealth again if we are to prosper. Can we meet this challenge, or is Australia truly running on empty?
[1] Our World Data, 2024
