Global oil disruption could cut Australia’s GDP by up to $42bn in 2026, scenario modelling shows

• Analysis shows Australia’s GDP could be $42 billion lower and investment reduced by $54 billion in 2026 under a prolonged disruption to oil flows through the Strait of Hormuz.
• Impacts escalate as disruption persists, shifting from higher fuel prices to supply chain reliability, delivery timing and broader operational constraints.
• Businesses that stress‑test operations and plan against multiple disruption scenarios will be better placed to protect margins and maintain continuity.

SYDNEY, AUSTRALIA, 23 APRIL 2026. 

Australia’s GDP could be up to $42 billion lower in 2026 under a prolonged disruption to global oil flows through the Strait of Hormuz, according to new EY-Parthenon modelling conducted to support business and government preparedness.

The modelling examines four scenarios – ranging from disruption contained within three months through to a prolonged shock lasting most of 2026 – to assess how impacts escalate as disruption persists and shifts from fuel prices to delivery timing, supply chain reliability and broader operational constraints.

The analysis undertaken in mid-April 2026 found that:

Under a contained disruption lasting less than three months, Australia’s GDP is around $7 billion lower in 2026, equivalent to approximately 0.2 per cent of GDP, with investment down $7 billion, household consumption down $11 billion and around 24,000 full time equivalent workers temporarily idled.

If disruption persists beyond three months, GDP losses could be $15 billion, or 0.5 per cent of GDP, with investment falling by $16 billion, household consumption by $25 billion and around 55,000 workers temporarily idled. In a severe prolonged disruption lasting most of 2026, Australia’s GDP could be around $42 billion lower over the year, or approximately $880 million a week in lost activity, with investment down $54 billion, household consumption down $70 billion and around 160,000 workers temporarily idled.

A fourth scenario tested the impact of government intervention, including activation of elements of the National Fuel Security Plan. While intervention reduces peak volatility and limits the GDP loss to around $34 billion, investment still falls by $43 billion and around 134,000 workers are temporarily idled, highlighting that policy action moderates the impact but does not remove the underlying global supply constraint or associated business continuity risks.

EY Regional Managing Partner and CEO for Oceania, David Larocca, said the modelling highlights how quickly economic risks escalate as global fuel disruption persists.

“The global fuel crisis is creating a complex set of challenges for Australian businesses, extending well beyond higher fuel prices,” Mr Larocca explained.

“While impacts will vary by sector and firm, the common thread is heightened uncertainty, new cost pressures and less resilience in energy dependent systems.”

“Global oil price increases are flowing quickly into transport, logistics, mining, agriculture, construction and manufacturing costs, with fuel acting as both a direct input and an embedded cost across supply chains. Many businesses have limited pricing power so will experience margin compression, rising working capital requirements and greater earnings volatility.”

“The disruption affects shipping availability, insurance costs and access to key upstream inputs such as fertilisers and chemicals, with longer transit routes increasing lead times and reducing reliability. That is turning inventory management and supplier diversification into strategic risks rather than routine operational considerations.”

Mr Larocca said the modelling underscored the importance of business preparation. 

“Businesses that are stress-testing their operations against different disruption scenarios, identifying critical dependencies and setting clear triggers for action will be better placed to protect margins and maintain continuity if conditions deteriorate.”

“We are seeing that the global fuel crisis is acting as a catalyst for strategic shifts, some already underway by many businesses, including electrification, energy efficiency, greater supply chain resilience and reduced reliance on just in time models, where businesses receive goods, materials or inputs only when they are needed rather than holding reserves or stockpiles.”

The modelling also demonstrates that governments are facing a complex set of challenges in the lead up to the Federal Budget as higher energy costs flow through the economy.

“The global fuel crisis is reinforcing inflationary pressures in Australia, creating difficult tradeoffs for policymakers between cost of living relief and the risk of prolonging inflation and constraining monetary policy,” Mr Larocca said.

-ENDS-

Media Contact:

Hamish Goodall
Corporate Affairs Manager, Oceania
0467 346 364
hamish.goodall@au.ey.com

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