The economic risks for Australia from the continuation of the Middle East war are increasing, the Treasury has warned, as the federal government weighs whether to extend subsidies for petrol and diesel into August.Oil prices have increased since the unravelling of a memorandum of understanding between the United States and Iran, with knock-on effects for Australian prices.Diesel, though below the peaks seen in late March, remains markedly above prewar prices across Australia Economists regard a hike as a possibility.The federal government has been under pressure over Australia's stagnating economic performance and the persistence of elevated inflation, which its opponents argue has been worsened by the above-average level of government spending.Mr Chalmers has countered that much of the recent uptick in economic activity is driven by private sector investment, led by investment in data centres, and by the war, which he said posed "a substantial threat to inflation".Mr Albanese will appear alongside WA Premier Roger Cook on Tuesday to announce the commencement of investigations into a new oil refinery in Karratha, backed by a $4 million government feasibility study."The longer war in the Middle East goes on the greater the impact on Australia will be, and my government will continue to do everything we can to shield Australia from the worst effects," he said in a statement.