Brent crude surged 4.6% on Friday to approximately $US88 (around $126 AUD), driven by intensifying tensions between Iran and the United States.
The sharp move in energy prices comes amid reports of renewed strikes, signaling a potential escalation in Middle East conflict that threatens global supply chains.
The spike in oil prices presents a fresh headwind for the Reserve Bank of Australia, which has already signaled its readiness to implement further interest rate increases to combat stubborn inflation.
Minutes from the central bank's June policy meeting revealed concerns about persistent price pressures, including those linked to union wage settlements.
A sustained rise in energy costs could force the RBA to maintain a hawkish stance longer than markets have priced in.
Barrenjoey economist Jo Masters argues that the inflationary pressure from rising oil prices means the RBA may need to raise rates again next month, with a potential second hike in November.