Australian businesses are under fire from both sides as conflict in the Middle East drives up prices and weakens demand.
After first lighting a fire under fuel costs, the impacts of the US-Israeli-led war in the Middle East have begun flowing through the rest of the Australian economy, adding to price pressures, the most recent Deloitte Access Economics Retail Forecast found.
Fuel, energy, plastics and fertiliser prices have surged while the rising cost of living is squeezing household budgets and dampening consumer spending.
All of this is set to temper retail sector growth, with retail turnover expected to increase by 1.8 per cent in 2026, down from 2.3 per cent in 2025, the report found.
"Events over the first half of 2026 mean Australian retailers are facing a simultaneous attack from both flanks - rising costs and weakening demand," Deloitte Access Economics partner David Rumbens said.
