The deal everyone wants, the unwind nobody is planning for
Talk of a US-Iran agreement to reopen the Strait of Hormuz has shifted from fantasy to plausible. If it happens, markets will cheer, crude will drop, and politicians will claim credit. But for every freight operator, farmer, and manufacturer in New Zealand carrying crisis-era fuel costs, the celebration will last about five minutes before the harder question lands: how fast do these prices actually come down?
The evidence says not fast, not automatically, and not completely.
Treasury’s best-case scenario, published in April, models what happens if Hormuz flows return to normal by Q3 2026. Even under those optimistic assumptions, oil prices do not fall to pre-conflict levels until early 2027. That is six to nine months of elevated costs after the geopolitical trigger is resolved. Supply chains do not snap back. They unwind slowly, and the businesses absorbing the costs are the last to benefit.
The numbers are brutal and they’re already baked in
The Commerce Commission’s weekly monitoring report from 16 April captures the damage clearly. Brent crude hit 115 USD per barrel, up 44% from the 71 USD pre-conflict baseline. Regular 91 petrol rose 35% to 347 cents per litre. Diesel, the fuel that moves the productive economy, hit 388 cents per litre, up 106%.
Against the Commerce Commission’s December 2025 quarterly baseline of 164 cpl for diesel nationally, that is a 137% increase. Diesel has not just risen. It has more than doubled.
By April, average fuel transaction volumes had dropped 6-8% as consumers and businesses cut back. The demand destruction is real, but it is also evidence of how little flexibility most operators have. You cannot not run your trucks.
This is not just a fuel story
ASB senior economist Kim Mundy put it plainly in May’s analysis: “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’s team found that roughly a quarter of New Zealand’s economy has high or very high exposure to at least two of the key disruptions simultaneously. Agriculture, manufacturing, construction, and transport are most exposed. But even less fuel-intensive businesses face pressure as households shift spending towards essentials and discretionary demand evaporates.
The March quarter CPI already showed petrol prices contributing 13.4% of the overall 0.9% quarterly rise, pushing annual inflation to 3.1%. That quarter only partially captured the Hormuz shock. The June quarter will be the first full read, and it will be ugly.
The margin gap the Commission can now see
Here is where the unwind gets politically interesting. The Commerce Commission’s weekly fuel monitoring, introduced specifically in response to this crisis, tracks the relationship between the 14-day rolling average of refined product costs and retail prices. Importer margins are visible in real time.
If crude falls and retail prices lag behind, the data will show it. Every cent of delay between falling import costs and falling pump prices will be documented. The tools exist. Whether anyone acts on them is the question that should make fuel importers uncomfortable.
Prime Minister Christopher Luxon acknowledged in April that even an overnight resolution would not immediately unwind market effects. The government has committed $21.6 million to refurbish two tanks at Marsden Point for a diesel reserve of about nine days’ typical use. That is better than nothing, but it underlines the structural thinness of New Zealand’s fuel security since the refinery closed in 2022.
Businesses need to renegotiate, not wait
The practical message for any business carrying fuel or petrochemical-linked costs is straightforward. Surcharges added during the crisis will not automatically disappear when a deal is announced. Freight contracts, supplier agreements, and logistics pricing will need to be actively renegotiated. Businesses that locked in supply at crisis prices may find themselves paying a premium long after the underlying commodity has fallen.
Treasury modelled a prolonged scenario where oil hits 135 USD per barrel and Gulf flows recover only by end of 2027. As of April, futures pricing sat between that scenario and something worse. A deal changes the trajectory, but it does not erase the costs already embedded in contracts, inventory, and pricing.
The spike was loud. The unwind will be quiet, slow, and contested. The businesses watching the gap between crude and pump prices will be the ones who recover fastest. The ones waiting for prices to fall on their own will be waiting a long time.
Sources
- Treasury: Media briefing – Economic Impacts of the Middle East Conflict (2026-04-23)
- Commerce Commission: Fuel price monitoring – 16 April 2026 (2026-04-16)
- Commerce Commission: Quarterly Fuel Monitoring Report – December 2025 (2026-03-05)
- 1News: Cost shock – Strait of Hormuz closure hits more than fuel prices – ASB (2026-05-25)
- 1News: PM confident on fuel security plans as Hormuz crisis persists (2026-04-13)
- Stats NZ: Consumers price index – March 2026 quarter (2026-03-26)
- RNZ: Fuel stocks dip, but within expectation, MBIE says