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TE UPOKO O TE IKA *** Subscribe [Politics](https://www.thepost.co.nz/politics) [Business](https://www.thepost.co.nz/business) [Auckland](https://www.thepost.co.nz/auckland) [The Capital](https://www.thepost.co.nz/capital) [Lifestyle](https://www.thepost.co.nz/life-culture) [Sport](https://www.thepost.co.nz/sport) [Sunday Star-Times](https://www.thepost.co.nz/sunday-star-times) [Puzzles](https://www.thepost.co.nz/puzzles) Log In *** Subscribe [Politics](https://www.thepost.co.nz/politics) [Business](https://www.thepost.co.nz/business) [Auckland](https://www.thepost.co.nz/auckland) [The Capital](https://www.thepost.co.nz/capital) [Lifestyle](https://www.thepost.co.nz/life-culture) [Sport](https://www.thepost.co.nz/sport) [Sunday Star-Times](https://www.thepost.co.nz/sunday-star-times) [Puzzles](https://www.thepost.co.nz/puzzles) *** Subscribe Log In *** # Iran War: The Government’s Global Financial Crisis Vernon Small March 14, 2026 Share  Prime Minister Christopher Luxon addresses media at post-Cab Prime Minister Christopher Luxon is questioned by journalists after the weekly Cabinet meeting, about the US-Israel military strikes on Iran and NZ's response. 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This modal can be closed by pressing the Escape key or activating the close button. 16:27 Prime Minister Christopher Luxon addresses media at post-Cab VIDEO CREDIT: Monique Ford **Vernon Small is a former journalist and Labour Government advisor.** **OPINION:** The Iran war is shaping up as this Government’s global financial crisis. Or perhaps its Covid pandemic in a minor key. Faced with its first major economic crisis – perhaps the second, if you count the on-again, off-again randomness of the Trump tariff regime – and the uncertainty of the war’s duration and impact, it has so far mostly managed to implement Risk Management Spin 101. Give reassurance, don’t over-egg the positive nor over-stimulate concern. Look straight-up, in-control and flexible and provide a consistent message without sounding overly “political”. Own the problem. No panic. No overreaction. But no false optimism either. Monday’s post-Cabinet press conference was designed to set the tone, with little concrete to announce other than a ministerial group to oversee events and the response. If it announced anything, it was a sort of negative decision; the Government’s extreme reluctance to provide short-term subsidies – such as cuts to fuel excise – that would ease the immediate pain for businesses and consumers. (In light of the criticisms of Christopher Luxon’s performance and speculation about his leadership, the focus on the war and its impacts would have been a useful “throw a dead cat on the table” moment to distract from the prime minister’s woes … if the cat was not so alive and angry.) Finance Minister Nicola Willis’ frustration at another roadblock to the economic recovery was understandable. She couldn’t resist revealing where the Treasury’s forecasts were leading until the Iran war broke out – an improving Budget deficit and a return to growth of 1.7% and then 3% a year.  Christopher Luxon and Nicola Willis earlier in the week said they were reluctant to cut fuel excise tax.The Post But it was only under persistent questioning that she put some numbers on the possible inflationary impact of the war: 0.5 to 1.0 percentage points; and the potential damage to the country’s growth rate: between 0.2% and 0.4%. The difficult political tightrope to walk is between reassurance – which Willis and other ministers have tried to provide in relation to the country’s available fuel stocks – and the danger of looking unprepared if things get worse. On that count, the Government’s subsequent thinking-out-loud about ways to reduce demand – such as rationing or Muldoon-era carless days (which were largely ineffectual and inequitable) - was on message, as was the supply-side hint that fuel quality standards could be lowered to allow the importation of “dirtier” petrol. But as the war grinds into its third week, with Iran threatening to continue its drone and ballistic missile strikes on the world’s economy and Israel saying it will continue its attacks even if the US declares an early victory, it is looking increasingly likely that the conflict is giving the New Zealand economy a nasty sideswipe. On the current trajectory, the potential stagflation-adjacent scenario – lower growth and higher inflation over the next few quarters – is all too real. Before the macro-economic forecasts come the real-world impacts, and they have arrived incredibly quickly. Petrol prices are heading over \$3 a litre, with warnings from Australian analysts that regular unleaded petrol prices could hit NZ\$4.22 a litre. Air NZ is lifting prices and cutting back services. Retailers and importers are warning of price rises ahead and “war surcharges” as the cost of extra fuel feeds into almost everything we make and consume. Much will depend on how the Reserve Bank “looks through” the first-round inflationary impact of the oil shock and then weighs the need to curb rising inflation against the dangers of crimping economic growth. We should know more after the April 8 official cash rate review. There are clear consequences for the housing market. Economist Tony Alexander has questioned whether, considering the inflationary impact of the war, time is still on the side of home-owners looking to lock in the current low-ish fixed rates, because rate rises may be imminent. And Alexander found a big shift in consumer mood in a monthly survey he has conducted since mid-2020. Late last year it showed a net 20% saying they planned to buy more stuff in the next 3-6 months. In February that was a little better at 23%. In his new survey, taken just over a week into the Iran conflict, that had dived to a net 4%. That reinforces the likelihood the economy will grow much less than previously forecast – and that Treasury’s forecasts finalised in April for the May 28 Budget will reflect that. Unless there is a radical change in the Iran conflict, or a rapid opening of the Hormuz Strait to oil tankers, the country is in for a much rougher time. That is throwing a greasy spanner into the election year wheel. Will it work in the Government’s favour, as voters flee to stability in uncertain times? Possibly. And for now, at least, the conflict has pushed Luxon’s future down the list of headlines. Yet, if the cost of living was the public's major concern before the conflict – and National is on the back foot with voters on that score – then it is only set to get worse. *What do you think? Email sundayletters@stuff.co.nz. 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Vernon Small 16:27 Prime Minister Christopher Luxon addresses media at post-Cab VIDEO CREDIT: Monique Ford **Vernon Small is a former journalist and Labour Government advisor.** **OPINION:** The Iran war is shaping up as this Government’s global financial crisis. Or perhaps its Covid pandemic in a minor key. Faced with its first major economic crisis – perhaps the second, if you count the on-again, off-again randomness of the Trump tariff regime – and the uncertainty of the war’s duration and impact, it has so far mostly managed to implement Risk Management Spin 101. Give reassurance, don’t over-egg the positive nor over-stimulate concern. Look straight-up, in-control and flexible and provide a consistent message without sounding overly “political”. Own the problem. No panic. No overreaction. But no false optimism either. Monday’s post-Cabinet press conference was designed to set the tone, with little concrete to announce other than a ministerial group to oversee events and the response. If it announced anything, it was a sort of negative decision; the Government’s extreme reluctance to provide short-term subsidies – such as cuts to fuel excise – that would ease the immediate pain for businesses and consumers. (In light of the criticisms of Christopher Luxon’s performance and speculation about his leadership, the focus on the war and its impacts would have been a useful “throw a dead cat on the table” moment to distract from the prime minister’s woes … if the cat was not so alive and angry.) Finance Minister Nicola Willis’ frustration at another roadblock to the economic recovery was understandable. She couldn’t resist revealing where the Treasury’s forecasts were leading until the Iran war broke out – an improving Budget deficit and a return to growth of 1.7% and then 3% a year.  Christopher Luxon and Nicola Willis earlier in the week said they were reluctant to cut fuel excise tax.The Post But it was only under persistent questioning that she put some numbers on the possible inflationary impact of the war: 0.5 to 1.0 percentage points; and the potential damage to the country’s growth rate: between 0.2% and 0.4%. The difficult political tightrope to walk is between reassurance – which Willis and other ministers have tried to provide in relation to the country’s available fuel stocks – and the danger of looking unprepared if things get worse. On that count, the Government’s subsequent thinking-out-loud about ways to reduce demand – such as rationing or Muldoon-era carless days (which were largely ineffectual and inequitable) - was on message, as was the supply-side hint that fuel quality standards could be lowered to allow the importation of “dirtier” petrol. But as the war grinds into its third week, with Iran threatening to continue its drone and ballistic missile strikes on the world’s economy and Israel saying it will continue its attacks even if the US declares an early victory, it is looking increasingly likely that the conflict is giving the New Zealand economy a nasty sideswipe. On the current trajectory, the potential stagflation-adjacent scenario – lower growth and higher inflation over the next few quarters – is all too real. Before the macro-economic forecasts come the real-world impacts, and they have arrived incredibly quickly. Petrol prices are heading over \$3 a litre, with warnings from Australian analysts that regular unleaded petrol prices could hit NZ\$4.22 a litre. Air NZ is lifting prices and cutting back services. Retailers and importers are warning of price rises ahead and “war surcharges” as the cost of extra fuel feeds into almost everything we make and consume. Much will depend on how the Reserve Bank “looks through” the first-round inflationary impact of the oil shock and then weighs the need to curb rising inflation against the dangers of crimping economic growth. We should know more after the April 8 official cash rate review. There are clear consequences for the housing market. Economist Tony Alexander has questioned whether, considering the inflationary impact of the war, time is still on the side of home-owners looking to lock in the current low-ish fixed rates, because rate rises may be imminent. And Alexander found a big shift in consumer mood in a monthly survey he has conducted since mid-2020. Late last year it showed a net 20% saying they planned to buy more stuff in the next 3-6 months. In February that was a little better at 23%. In his new survey, taken just over a week into the Iran conflict, that had dived to a net 4%. That reinforces the likelihood the economy will grow much less than previously forecast – and that Treasury’s forecasts finalised in April for the May 28 Budget will reflect that. Unless there is a radical change in the Iran conflict, or a rapid opening of the Hormuz Strait to oil tankers, the country is in for a much rougher time. That is throwing a greasy spanner into the election year wheel. Will it work in the Government’s favour, as voters flee to stability in uncertain times? Possibly. And for now, at least, the conflict has pushed Luxon’s future down the list of headlines. Yet, if the cost of living was the public's major concern before the conflict – and National is on the back foot with voters on that score – then it is only set to get worse. *What do you think? Email sundayletters@stuff.co.nz. Please include your full name and address.*