Australia’s oil supplies are “in the crosshairs” if the US-Iran conflict escalates, a leading energy security expert has warned, after crude prices spiked in response to Iranian missile strikes on American bases in Iraq.

Oil prices jumped 5 per cent as news of the attack broke, lifting Brent crude prices to $US71.75 a barrel.

Prices later eased to $US69.16, up 1.3 per cent for the day, after traders took reassurance from US President Donald Trump’s Twitter declaration that “all is well”.

But Dr Elizabeth Buchanan, lecturer in strategic studies at the Department of Defence’s Australian War College, warned the oil price would “be the first casualty” if the US hit back, sparking further clashes.

“I expect Iran to use oil as weapon against the US, and more so against her allies as the US has strong domestic supplies and is no longer a net importer,” she said.

“This means Australian supplies are in the crosshairs.

“The oil price is steadily rising and we have no emergency stocks as we let private companies manage the sector and our government is nowhere to be seen.”

Australia imports 90 per cent of its liquid fuel, and the majority of that comes via refineries in Singapore. But a significant proportion of Singapore’s oil “originates in Middle-Eastern oilfields,” Dr Buchanan said.

While Iran is under severe export sanctions, it has shown itself willing to disrupt the flow of oil shipped through the Strait of Hormuz, the only sea passage from the Persian Gulf to the open ocean.

HMAS Toowoomba departs on Monday to join an international mission to protect shipping in the gulf.

Scott Morrison, when announcing in August the commitment to join the US-led effort, noted that 15-16 per cent of crude oil and 25 to 30 per cent of refined oil destined for Australia travelled through the Hormuz Strait.

“So it is a potential threat to our economy,” the Prime Minister said.

The government on Wednesday said the escalating conflict between the US and Iran did not expose an “immediate threat” to Australian fuel supplies.

“The government is closely monitoring the unfolding events in Iraq and advice from the Department of Environment and Energy is there is no immediate threat to Australia’s fuel supplies,” a spokesman for Energy Minister Angus Taylor said.

The latest Department of Environment and Energy figures show that in October Australia only had 25 days of petrol reserves, and 19 days of diesel.

However, Australian refiners argue this significantly underestimates the available fuel stocks as it does not include crude oil stored at refineries and in the distribution and customer supply chain. Nor does it include transport fuels and crude oil owned by Australian companies en route to Australia.

The International Energy Agency estimates Australian liquid reserves equivalent to 57 days of net oil imports, as at September.

As a member of the IEA, Australia is required to hold emergency oil stocks equivalent to at least 90 days’ worth of net imports and is the only member country not meeting this obligation.

To address this shortfall, the government has been in negotiations with the US since at least August to buy access to millions of barrels of US fuel reserves, which are located in Texas.

The Australian understands negotiations with the US remain on track.

Dr Buchanan said she believed the emergency fuel reserve stood at closer to 10 days on net imports, “and even less given bushfires are sucking fuel for fire engines, planes and generators”.

She noted the government’s only plan to address the issue was accessing US stockpiles, but said the situation was “not sustainable”.

“Costs will increase. But I expect the private sector won’t absorb the cost — the Australian public will.”

Extracted from The Australian