The wrong risk is getting all the attention
The government told the public in March that New Zealand had 57 days of fuel cover between onshore stocks and ships in sovereign waters. That number has dominated reassurance messaging ever since. It answers a question nobody credible was asking. No serious analyst thinks New Zealand will run out of petrol. The actual risk is a sustained input-cost shock compressing margins across multiple sectors simultaneously, while household spending tightens in response to higher fuel and food prices.
New Zealand does not import oil directly from the Persian Gulf. It sources over 90% of its refined petroleum from Asian refiners, primarily South Korea, Singapore, Malaysia and Japan. Those refiners in turn source 75% of their crude from Gulf countries. New Zealand sits two steps downstream from the Strait, which means price shocks arrive with a lag and the full cost impact takes months to work through supply chains. That lag is not a buffer. It is a slow-moving hit that business owners are only now beginning to feel.
Fertiliser is the second-order shock nobody planned for
The Strait of Hormuz carries roughly 20% of global oil supply, but it is also a critical conduit for liquefied natural gas, the dominant input cost in ammonia-urea production worldwide. When maritime traffic through the Strait fell effectively to zero after the conflict began, LNG carriers rerouted and insurers withdrew cover, sending global gas prices surging.
New Zealand’s urea supply is dangerously concentrated. The country imported 290,010 tonnes of urea from Saudi Arabia in 2024, with virtually no domestic production backstop. The Treasury’s March SITREP noted New Zealand had imported approximately $200 million of fertiliser from the Middle East over the 12 months prior to the conflict. MFAT data shows fertiliser imports from the region fell 27% in March-April 2026 compared to the same period last year, while global urea prices increased 40-60% above pre-crisis levels.
That price increase has not yet fully hit farm gate invoices. When it does, it will flow into food production costs, processing margins, and eventually consumer prices. The government noted at its March press conference that over one-fifth of global fertiliser supply comes from Saudi Arabia. A single chokepoint controls access to a critical agricultural input for the entire country.
More than a quarter of the economy is directly exposed
ASB’s supply chain analysis, published in May, found more than a quarter of New Zealand’s economy has high or very high direct or indirect exposure to at least two key disruption channels simultaneously. Senior economist Kim Mundy put it plainly: “The broader story is how the entire cost shock, which includes fertiliser and petrochemicals, spreads through supply chains, lifting the cost of manufactured goods, packaging, freight and farm inputs.”
Mundy warned that “few sectors are likely to escape entirely”, with agriculture, manufacturing, construction and transport most exposed. Even less fuel-intensive businesses face risk as households shift spending towards essentials.
Treasury’s scenarios are reassuring by design
The Treasury briefing of 23 April modelled three scenarios. The best case puts oil at roughly US$110 per barrel in Q2 2026, falling to pre-conflict levels by early 2027. The prolonged conflict scenario has oil at US$135 per barrel through mid-2026 with Gulf flows not recovering until end of 2027. The severe disruption scenario, Strait capacity at roughly 10% of normal, puts oil at US$180 per barrel with flows not fully recovering for four to five years.
Treasury’s framing was that “economic recovery is delayed but not derailed.” That is carefully worded. It does not say the disruption is cheap.
The early March SITREP documented Brent crude at US$84 per barrel, estimating that if sustained it could add 0.3 percentage points to inflation and raise petrol prices by around 20 cents per litre. Singapore jet fuel prices had already doubled.
The export side is bleeding too
The cost shock is only half the picture. MFAT data shows New Zealand’s exports to Gulf countries fell 37% to $397 million in March-April 2026 compared to the same period last year. Total exports to the region were $3.4 billion for the year ending December 2025, with dairy representing 70% of that and 85% concentrated in Saudi Arabia and the UAE. New Zealand’s biggest agricultural exporters are simultaneously facing higher input costs and shrinking access to a key market.
What happens next matters more than what happened first
The diesel price rise of roughly 45% since the conflict began is visible and visceral. The fertiliser price increase of 40-60% is slower, embedded in farm input invoices, and will arrive in food prices later this year. That is the number that deserves more boardroom attention.
Businesses that are only watching the pump price are looking at the wrong indicator. The real question is not whether New Zealand runs out of fuel. It is whether margins across agriculture, construction, manufacturing and transport can absorb a multi-month input cost shock while consumer spending simultaneously contracts. ASB’s analysis suggests the answer, for more than a quarter of the economy, is no.
Sources
- 1News: ‘Cost shock’: Strait of Hormuz closure hits more than fuel prices – ASB (2026-05-25)
- Treasury: Media briefing – economic impacts of Middle East conflict (2026-04-23)
- Treasury: Middle East developments SITREP – 6 March 2026 (2026-03-06)
- Beehive: Post-Cabinet Press Conference – 9 March 2026 (2026-03-09)
- MFAT: Trade and economic implications of the Iran conflict
- MFAT: The Iran conflict – New Zealand’s economic and merchandise trade data
- BERL: A strait in crisis reveals our agricultural vulnerabilities