Global oil prices have surged again, with Brent crude climbing above US$116 a barrel as escalating Middle East tensions tighten supplies and threaten another inflation shock for Australia.
Brent futures jumped more than 3% to around US$116.72 a barrel, while West Texas Intermediate crude climbed above US$103.
Oil has now risen substantially from below US$100 at the beginning of October, adding pressure to fuel, transport and industrial costs around the world.
The rally comes as concerns grow around shipping disruptions and potential damage to energy infrastructure in the Middle East.
Australia imports much of its refined fuel, meaning international oil price movements can flow relatively quickly into petrol and diesel prices.
Higher diesel costs also affect mining, agriculture, construction and freight, increasing operating expenses across large parts of the economy.
The renewed oil surge comes at a particularly difficult moment for the Reserve Bank.
Australian inflation is already running well above target and the RBA has raised the cash rate four times this year to 4.60%.
Another sustained rise in fuel prices could slow progress on inflation and strengthen the case for further monetary tightening.
Oil is also influencing global bond markets.
The US 10-year Treasury yield has moved back towards 5% as investors reassess whether central banks can safely ease policy while energy prices remain elevated.
