Australian Business Conditions Hold Steady as Easing Cost Pressures Face New Oil Price Risks

Australia’s business conditions remained stable in June as easing cost pressures and improved sentiment followed a U.S.-Iran peace agreement that temporarily reduced global energy concerns, according to the latest National Australia Bank (NAB) business survey. However, renewed fighting in the Middle East has once again pushed oil prices higher, creating fresh uncertainty for businesses and policymakers.

NAB’s business conditions index held at +3 for the third consecutive month, indicating that overall business activity remained resilient despite ongoing economic challenges. Business confidence improved significantly, rising to -5 from -14 in May, although it remained in negative territory.

The improvement was largely driven by lower energy-related inflation after the United States and Iran reached an agreement to end months of conflict that had disrupted global energy markets. The survey showed product price growth slowed to its lowest level since February, while retail prices declined for the first time in seven years, offering encouraging signs that inflationary pressures had eased.

NAB said the survey continues to point to slower economic activity during the first half of 2026 but noted that the impact of the Middle East conflict on Australian businesses had been less severe than initially feared. The easing in price pressures also suggests businesses experienced some relief from elevated operating costs during the month.

However, market conditions changed rapidly after tensions resurfaced in the Gulf. The United States resumed military strikes against Iran and reinstated its blockade of shipping through the Strait of Hormuz, a key global oil transit route. The renewed conflict lifted Brent crude prices by around 2% to $85 per barrel after an almost 10% surge in the previous session, raising concerns that higher fuel costs could once again fuel inflation.

The Reserve Bank of Australia has already raised interest rates three times this year, bringing the cash rate to 4.35% as it works to contain inflation driven by higher energy prices. While the central bank left rates unchanged at its June meeting, policymakers emphasized that additional rate hikes remain possible if inflationary pressures intensify again.