Major Australian businesses are beginning to feel significant financial strain from the ongoing Middle East conflict, as escalating fuel costs and declining confidence signal potential economic trouble ahead.
Two of the country’s largest corporations – Qantas Airways, the nation’s leading airline, and Westpac Banking Corp, Australia’s second-biggest bank – have issued warnings that their earnings face pressure from skyrocketing energy prices and customer impacts, concerns previously raised by the nation’s central banking authority.
“With the supply shock from the energy market disruption expected to result in higher inflation and higher interest rates, an expected slowing in economic growth will create a more challenging environment for some customers,” Westpac stated.
These corporate announcements represent the most concrete evidence to date of how the Middle Eastern warfare and resulting energy crisis are affecting Australian company profits.
The warnings coincided with survey data revealing sharp drops in both business and consumer confidence, while Reserve Bank of Australia Deputy Governor Andrew Hauser warned the nation might be confronting “the central bank’s nightmare: the stagflationary shock – inflation up, activity down.”
Qantas disclosed that its aviation fuel expenses for the latter half of its fiscal year ending in June could reach A$800 million ($567 million), representing a 32% increase over earlier projections due to oil price surges. The carrier has responded by reducing flight schedules and increasing ticket prices.
“Jet fuel prices have more than doubled and remain highly volatile,” Qantas reported in its market announcement, noting it was carefully watching the “dynamic environment” and might implement additional measures to counteract rising fuel expenses.
The airline also postponed a planned A$150 million share repurchase program due to increased market uncertainty.
Westpac expanded its credit loss reserves, expecting borrowers to face greater difficulties amid rising costs and interest rates. The bank noted its provisioning reached levels not seen since the COVID-19 pandemic.
Market reaction was more severe for Westpac than for Qantas, with banking shares dropping 3.7% compared to the airline’s 1% decline.
“Westpac is interesting because they’re talking about potentially higher bad debts on some of their energy-exposed customers,” commented Omkar Joshi, chief investment officer at Opal Capital Management.
Market analysts suggested that prolonged Middle Eastern conflict would create increasingly significant financial impacts, likely triggering additional profit warnings across industries.
The National Australia Bank’s business confidence indicator plummeted 29 points to -29 in March, a decline typically associated with major economic crises like the 2020 pandemic. Consumer sentiment separately fell 12.5% in April to its weakest point in over two years.
The ripple effects extended beyond Australia, with New Zealand’s a2 Milk reducing its 2026 profit outlook on Monday, attributing the change to supply chain disruptions from the Middle Eastern conflict.
Joshi from Opal Capital Management characterized recession or stagflation as “definitely a real risk.”
“And has the risk increased in the last six weeks? I’d say definitely it has,” he added.
