Australian consumer sentiment has fallen to levels not seen since the pandemic as petrol prices rose in response to the Middle East conflict, which has entered its third month. The Westpac-Melbourne Institute consumer sentiment index shows anxiety over jobs has reached pandemic-era levels, with many households changing spending habits because of fuel costs and high living expenses.

The oil crisis is rippling across the Australian and global economy, affecting the prices of a range of products. Fuel, fertiliser, and transport costs have risen and will feed through to higher prices in supermarkets. Several Australian building suppliers have announced price rises of about 30% for PVC pipes, and Malaysia's Karex plans to raise prices by up to 30% if supply chain disruptions continue. Less than a year ago, inflation appeared under control and interest rates were falling.

Households are forgoing purchases of furniture, bedding, and home appliances. Over the past two months, shares in Nick Scali have fallen about 20%, shares in Harvey Norman have fallen more than 25%, and shares in Adairs have dropped by more than 30%.

"People don't like war, it's a confidence killer," said Richard Hemming, editor at Under The Radar Report. "You've got a lot of headwinds at the moment. The environment is one of consumer constraint, and retail is at the front of that," he said.

Cochlear lost more than 40% of its market value in a single trading session on Wednesday after downgrading its profit outlook as global demand for its cochlear implants weakened. The company told shareholders that poor sentiment appears to be affecting discretionary healthcare decisions, with prospective patients unable to afford treatment, especially in the United States.

The ASX-listed alcohol packaging company Orora has detected a global shift toward cheaper spirits since the start of the Iran war, and its sales volume has come in below previous forecasts as customer confidence diminished. Cafes and restaurants are facing rising costs while customers cut back on takeaway coffees and eating out.

"They are getting something that's a little bit cheaper, or opting for lower alcohol content, not necessarily as a responsibility measure but more because of cost," said Steven Fanner, executive director at Spirits & Cocktails Australia. "The question for businesses is how do you contain the price of products for the consumer because they don't have any more money to spend, even if the cost of producing the product and getting it to market is going up," he said.

Spending data from Zip shows increased use of its buy now, pay later platform over the past three months for essential items including utilities, insurance, education, and health.

"Mortgages are now the top presenting issue," said Kirsty Robson, senior financial counsellor at the Consumer Action Law Centre. "People have very future-focused anxiety because they are unsure how they will afford to pay for things. They are panicking, and perhaps rightly so, about how they're going to manage in a couple of months' time because they are reaching their financial capacity now," she said.