The Reserve Bank of Australia said it had lifted its cash rate 25 basis points to 4.35 percent, pointing to economic pressure stemming from turmoil in the Middle East.

“As expected, developments in the Middle East are having an impact on inflation,” the bank said in a statement.

“Higher fuel prices are adding to inflation and there are indications that this is likely to have second-round effects on prices for goods and services more broadly.”

Global oil prices have surged since the United States and Israel launched strikes against Iran on Feb 28.

Iran has retaliated by choking off access to the Strait of Hormuz, through which a fifth of global oil and gas usually passes.

Many economists have warned that a protracted war could fuel an inflation shock similar to that seen after Russia’s 2022 invasion of Ukraine.

“There are early signs that many firms experiencing cost pressures are looking to increase prices of their goods and services,” the bank said.

Figures released last week showed inflation at 4.6 percent in Australia, the highest it has been since late 2023.