Australia is bracing for the impact of heightened tensions in the Middle East, with analysts warning that disruptions to global supply chains and resources are set to weigh on the Pacific nation's economy.

Harry Murphy Cruise, head of economic research and global trade at economic advisory Oxford Economics Australia, said the joint United States and Israeli military action on Iran and the ensuing turbulence in the Middle East will have ripple effects on Australia.

"The main effects are indirect. Oil is the clearest channel — while most of Australia's refined fuel is sourced from Asia, global oil prices still (have a bearing)," he said.

"On top of that, some of the crude refined in Asia originates in the Gulf, meaning Australians are not insulated from price spikes. That will marginally push up inflation at a time when price pressures are already rearing their head," Cruise said.

He said that more broadly, heightened global uncertainty would tend to weigh on business investment and household spending, "suggesting the Australian economy may end up slightly weaker than otherwise this year".

"One offset is gas. As a major liquefied natural gas exporter, Australia can benefit from higher global gas prices … and increased government revenues," Cruise said.

Amid concerns about rising fuel costs from the situation in the Middle East, the Australian Competition and Consumer Commission, or ACCC, said it is keeping a close eye on the gasoline market.

"We remind retailers that making false or misleading statements to consumers about the reasons for price increases would be in breach of the Australian Consumer Law," Commissioner Anna Brakey said in a statement on March 6.

"The ACCC will not hesitate to take action if representations and market behavior by a petrol company contravene competition and consumer laws," she said. "We have written to major fuel companies to set out our expectations about domestic fuel pricing as these international events unfold."

According to data from the New South Wales government's fuel price monitoring platform, the average price of premium 95 gasoline across NSW and the Australian Capital Territory hit A$2.29 ($1.64) a liter on Wednesday. Prices have been rising steadily during the week, compared with A$2.12 a liter for the same fuel grade on March 4.

Stoking inflation

Higher fuel costs may stoke inflation and related fears for the local economy. Swings in automotive fuel prices have been shown to have a significant effect on the consumer price index, Australia's primary measure of inflation, according to Commonwealth Bank of Australia analysis.

"Higher oil prices can lift some prices, but they can also leave households with less spare cash to spend elsewhere. That can soften demand in other parts of the economy," the bank said in a statement.

Shane Oliver, head of investment strategy and chief economist at Australian financial services group AMP, said in an analysis that the main way Australians will feel the impact of the conflict would still be via higher gasoline prices.

"This is because our prices are set globally — to which is then added tax, transport costs and margins. Roughly speaking, each $1 barrel rise in oil prices adds around a cent a liter to petrol prices," he said.

Oliver said the rise in fuel prices would "impart a dampening impact on growth", adding to household bills and cutbacks in spending elsewhere in the economy.

Amid fears of the Middle East conflict translating into price hikes for local consumers, Australian Prime Minister Anthony Albanese said the country's economic strengths would at least help it face the challenges.

"Look, there is no question that when you have a global event like this, it will have an economic impact," Albanese told local media late last week. He added that Australia was coming to it from a position of strength, with the largest fuel reserves in 15 years.