Asia's Oil Shock : Impact on NZ

The war in the Middle East has sent shockwaves through Asian energy markets, and the ripple effects have already landed in New Zealand, with fuel costs rising by the day and shortages already being predicted.

The conflict which has effectively cut oil and gas flows through the Strait of Hormuz — is doing more than just pushing up global fuel prices. It's triggering a cascade of economic pressures across the Asia-Pacific region that New Zealand must take heed of.

The double squeeze on Asian economies

Countries across Asia are being hit simultaneously by surging oil prices and weakening  currency values. As global investors pull money out of riskier markets and funnel it into US assets, the US dollar has climbed toward its highest value against Asian currencies in two decades. For many of New Zealand's closest trading partners and neighbours, currencies are weakening at precisely the moment they need the most buying power.

The Philippines, which imports 90 percent of its oil from the Middle East, has declared a national energy emergency. South Korea — where nearly 70 percent of crude oil supply passed through the Strait of Hormuz — has launched a nationwide energy-saving campaign. India's main stock index has fallen sharply since the conflict began, dragging the rupee with it. Thailand's baht has hit a 10-month low, with truck drivers reporting diesel shortages that are already disrupting goods movements to and from ports.

Analysts have described the supply shock as worse than the oil crises of the 1970s, and  Bloomberg has reported the South Korean government is currently discussing whether to redirect jet fuel away from the export market to the domestic market, amid mounting supply pressures.

Why this matters for New Zealand

New Zealand's economy is deeply tied to Asia. China, Australia, Japan, South Korea, and the United States together account for the vast majority of New Zealand's exports. When Asian economies slow, demand for New Zealand's primary exports — dairy, meat, horticulture, wood and seafood — tends to fall. New Zealand goods become more expensive for buyers in markets across Asia, even before any predicted weakening in underlying demand. For exporters already dealing with tight margins, that exchange rate shift can be the difference between a profitable season and a loss.

Tourism is another pressure point. Asia has become one of New Zealand's most important visitor markets, and the financial anxiety spreading through countries like South Korea, India, Thailand, and the Philippines is already prompting holiday cancellations. Thailand's own tourism industry — normally a beneficiary of a weak baht — is seeing cancelled bookings because of broader global travel jitters. The same wariness is likely to suppress inbound visitor numbers to New Zealand.

Fuel costs at home

These days, New Zealand is always at the mercy of the oil markets.  The country imports virtually all of its liquid fuel, and the global benchmark prices feed directly into what businesses and consumers pay at the pump and for freight.

The agricultural sector is particularly exposed. Fuel is a significant input cost for farmers, contractors, and transport operators. An extended period of elevated prices would add pressure to farm operating costs, which are already elevated after several difficult seasons.

The signs were actually more positive in early 2026, with rural sentiment in New Zealand more optimistic, driven by strong commodity prices and a generous dairy payout.

After a period of high costs, farmers reported seeing better returns, particularly in the dairy and red meat sectors, due to a combination of strong demand, high production, and a lower New Zealand dollar.

The last week will have dampened that optimism, with a massive hike in fuel costs impacting all on-farm operations.

The currency dimension

A stronger US dollar is a double-edged sword for New Zealand. On one hand, the New Zealand dollar tends to weaken when global risk sentiment turns negative — and a weaker New Zealand dollar makes exports more competitive in US dollar terms. On the other hand, it makes imported goods, including fuel, more expensive in New Zealand dollar terms.

If the current pattern holds — a strong US dollar, a weak New Zealand dollar, and elevated global fuel prices — New Zealand households could face a squeeze similar in structure, if smaller in scale, to what Asian countries are experiencing right now.

What to watch

The immediate indicators to watch are how quickly oil supply disruptions ease, whether diplomatic efforts produce a ceasefire, and how Asian central banks respond.

Current US strategy in the conflict seems unclear to many analysts, with a poorly-defined rationale over whether the goal is regime change, deterrence, or neutralising Iran's nuclear capabilities.

Suggestions that the US may be considering a ground invasion of Iran to secure the Strait of Hormuz does nothing to calm markets in Asia, given the likely response from Iran.  

Countries across the region are already cutting government spending, rationing fuel, freezing utility prices, and adjusting interest rates — all policies that affect Asian consumer demand, including demand for imported goods and services from New Zealand.

If the conflict drags on, the pain in Asian markets will deepen, and that will lead to softening export prices, weaker tourism flows, and higher costs domestically.

Asia Media Centre