June 28, 2026 — 1:58pmAustralian fuel prices are back to levels not seen since before the Iran war began four months ago, delivering much-needed relief to motorists as steep cuts in global oil costs continue flowing through to local service stations.New price data reveals that average unleaded petrol prices in Sydney and Melbourne have slid below $1.56 a litre, while diesel has dropped under $1.78 a litre. This marks the cheapest that fuel has been since late February, when Iran started blocking crude oil tankers from exiting the Persian Gulf, causing huge increases in the cost of fuel and triggering a global energy crisis.Fuel prices have fallen to their lowest levels since the outbreak of the war in Iran.Steven Siewart.At today’s prices, petrol and diesel are about 40 per cent cheaper than they were at the height of the conflict, when unleaded reached a record-high national average of $2.53 a litre and diesel soared to $3.19. Prices began easing following a preliminary ceasefire and progress towards reopening the Strait of Hormuz – a vital maritime choke point off Iran’s southern coast that handles up to 20 per cent of global oil trade.However, prices at the pump may not remain at these subdued levels for long. From Wednesday, motorists will face an immediate 16¢-a-litre increase when the Albanese government reintroduces the fuel excise at a half rate.Global oil markets also remain on edge following flare-ups in hostilities in the Middle East, which could send prices higher yet again. Iran said on Saturday that it had launched strikes against American targets in Bahrain and Kuwait, raising questions about the status of talks to reach a final peace agreement.Still, experts say this month’s steep falls in petrol and diesel prices have provided a critical economic buffer in Australia that will soften the blow of the government’s partial fuel-excise reinstatement. Continued falls in Asian oil and refined fuel benchmarks that directly influence local fuel costs are also raising the chance of deeper price cuts to come.Tapis crude, the primary oil benchmark used in the Asia-Pacific, has fallen more than 20 per cent in the past two weeks alone and is now trading at $US76 a barrel – nearly the same as it was in February before the war began.Despite the addition of another 16¢ a litre on Wednesday, fuel would remain at “relatively affordable” levels below $1.70 a litre for unleaded and below $2 for diesel, said Peter Khoury, a spokesman for the National Roads and Motorists’ Association.“Those prices are not levels where it gets too much and people start to change their behaviour,” he said. “We are in a better place than we were.”Analysts said oil prices had dropped due to signs of increased vessel traffic through the Strait of Hormuz and expectations of a sharp rebound in oil supply. Investors were also pricing in the return of Venezuelan crude oil that was “helping to plug the gap” in thick, high-sulphur oil from the Middle East, known as heavy sour crude, said Ajay Parmer, head of energy at commodities research firm ICIS.But as continued hostilities threatened to undermine negotiations to end the war, Khoury cautioned that “things could change anytime” and erase recent price falls. “We don’t know what the back end of this will look like, or how long it will take,” he said.Even if bowser prices did not rise significantly from here, the economic effects of the fuel price shock Australia experienced in March and April would linger, KPMG chief economist Brendan Rynne said. Second-round inflationary effects – the delayed consequences of higher petrol and diesel prices – had started showing up in elevated food and agricultural costs, and the cost of oil derivatives, such as plastic packaging.“From an inflation perspective, we are now starting to see the secondary effects coming through, reflecting higher input costs of a couple of months ago,” Rynne said.Although global oil prices have fallen sharply, the Asia-Pacific’s main unleaded benchmark – Singapore Mogas 95 – is still trading above prewar levels, which influences petrol prices in Australia. Rynne said this was due to a drop-off in oil deliveries reaching Asia’s refineries from the Middle East, and meant the federal government needed to continue working to secure priority access to spare petrol and diesel shipments to keep supplies and prices stable. “We still have challenges around getting our refined product,” he said.The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.From our partners