“The US has just declared victory from a bruising two year battle with inflation, giving the US Federal Reserve the leeway to last month slash interest rates by 0.5 percentage points.

More cuts are scheduled in coming months, even as unemployment remains historically low with solid jobs growth.

Should Israel attack Iranian oil export facilities, however, analysts believe oil could surge almost 40 per cent, back towards $US100 a barrel, potentially igniting another bout of inflation.

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How does all this impact Australia?

As a major energy exporter, higher prices benefit us as a nation. Gas and coal prices generally rise as oil prices lift, companies earn bigger profits and pay more tax which lifts our national wealth.

The downside, however, is that fuel is a component in almost everything we consume, from food and shelter to clothes and chemicals.

That adds directly to the cost of production of almost everything, including the gear we import, which then forces prices higher.

A major spike in the cost of fuel would be enough to scare the Reserve Bank of Australia on potential rate cuts.”