Credit-demand figures indicate business conditions have been headed south since before the US-Israeli war on Iran rocked global energy markets.

Small Australian businesses are failing at a faster pace and the global energy price shock sparked by the US-Israeli attack on Iran may mean the worst is yet to come.

Business insolvencies – comprising unincorporated, often owner-operated small businesses like sole traders or partnerships – surged 19 per cent year-on-year in February, according to data from consumer credit agency Equifax.

Incorporated company failures rose three per cent.

Business demand for credit increased by a marginal 0.9 per cent over the period, reflecting an easing from a period of strong demand to a more subdued, flat environment, Equifax commercial general manager Brad Walters said.

The monthly data told a “tale of two insolvencies”, Mr Walters said.

“Company insolvencies appear to have reached a plateau, and are steady but at a very high peak,” he said.

“However, business-related personal insolvencies continue to climb, with a long way to go to reach pre-pandemic levels.”

Business insolvencies in Victoria soared 31 per cent in January 2026 compared to January 2025.

The stress for incorporated entities was geographically concentrated, with company insolvencies so far in 2026 led by Queensland (+7 per cent) and NSW (+5 per cent).

Applications for asset finance loans rose 2.3 per cent on the previous February, while business loan demand increased 3.5 per cent nationally.

The data pre-dates the US-led February 28 attack on Iran, which ignited a series of tit-for-tat strikes on energy infrastructure and the effective closure of a major choke point for oil supply, sending energy markets into a tailspin.

The energy shock has also heightened inflation expectations and contributed to the Reserve Bank of Australia’s decision to hike the cash interest rate to 4.1 per cent.

The conflict is likely to have a number of sector-level impacts, particularly in freight.

“The (logistics) sector is currently on the cusp of significant global pressure,” Mr Walters said.

“Looking ahead, we are likely to see a number of headwinds here, given geopolitical tensions and the elevated nature of energy and fuel prices, wage cost pressures, and a rising interest rate environment.”

Applications for asset finance in construction were encouraging, led by a 21.5 per cent surge in Queensland, likely linked to equipment investment and infrastructure ramp-ups ahead of the 2032 Brisbane Olympic and Paralympic Games.

In hospitality, business loan demand jumped 13.7 per cent while appetite for asset finance declined two per cent, possibly indicating a priority for cash flow over capital expansion.

This article was first published by AAP.

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