AS IT HAPPENED: Iranian drone strike causes fire at major oil refinery; Middle East war, fuel prices drive rise in spending; South Korean ship that caught fire in Strait of Hormuz will be towed and investigated; Emirates back to almost complete service

Thanks for joining us for our live coverage of the Middle East conflict.

Here are the key events from today, May 5:

• Both the USA and Iran launched attacks or strikes today, with the USA claiming to have "shot down" seven small Iranian ships in the Strait of Hormuz, while Iran hit different sites in the UAE.
• Iran's strikes on the UAE were almost universally condemned, including by Australia, with Prime Minister Anthony Albanese calling for a de-escalation.
• Some insiders believe the USA is moving to restart combat missions, as President Donald Trump refused to confirm whether the ceasefire was still going.
• The economic pressures caused by the war have forced a third consecutive interest rate hike in Australia. The RBA announced it has increased the cash rate by 0.25 basis points to 4.35 per cent.

Treasurer Jim Chalmers isn't speaking just yet, but a brief statement tells you all you need to know about his thought on the RBA's rate rise.

"Australians are already paying a hefty price for the war in the Middle East, and this decision will make it tougher," he said.

"It will add to the pressure that families and businesses are under at a time of ongoing global instability.

"The RBA's Statement is clear that conflict in the Middle East is already adding to inflation."

The Reserve Bank of Australia has hiked interest rates for the third time in a row, raising the cash rate by 0.25 points to 4.35 per cent.

In its statement, released just moments ago, it said the impacts of the Middle East conflict were now being properly figured into their calculations.

"The conflict in the Middle East has resulted in sharply higher fuel and related commodity prices, which are already adding to inflation," it said.

"The Bank has updated its forecasts to incorporate recent data and developments in the Middle East."

Read our full coverage of the interest rates decision in our live blog with Yashee Sharma here.

Iran launched drone and rocket attacks at targets in the United Arab Emirates today, authorities said.

The UAE, a US ally, said its air defenves "engaged" 19 Iranian missiles and drones. However, three Indian nationals were moderately injured following a drone strike that sparked a "major fire" at the Fujairah Oil Industry Zone.

Mobile phone footage that has been shared on social media shows a large fire visible, with a black plume of smoke billowing into the air.

Rising fuel prices driven by the conflict in the Middle East have caused household spending increase, according to the latest figures released by the Australian Bureau of Statistics (ABS).

Overall spending rose by 1.6 per cent in March, which is a much sharper rise than the 0.3 per cent and 0.2 per cent seen in the first two months of the year.

"Household spending rose strongly in March, driven by a 5.1 per cent rise in transport costs as fuel prices climbed in response to the conflict in the Middle East," ABS' Tony Lay said.

Using the monthly consumer price index to create an experimental estimate on monthly spending, the ABS found fuel prices increased by 32.8 per cent, while the amount of fuel purchased fell by 1.3 per cent.

Fuel prices spiked and peaked at the end of March as the global price of oil skyrocketed and concerns about demand increased.

The data suggested food spending also increased by 1.7 per cent, reflecting higher food prices and households engaging in "precautionary stockpiling" in response to concerns over global supply chain delays.

The South Korean-operated vessel in the Strait of Hormuz that caught fire after an explosion on Monday will be towed to a nearby port for checks and repairs, Seoul's foreign ministry said.

The ministry said investigations will be carried out to determine the exact cause of the fire after the vessel is towed.

The ship was carrying 24 crew members, including six South Koreans, and no casualties were reported, authorities said.

Twenty-six South Korea-related vessels have been stranded at the strait since the war in the Middle East began.

Prime Minister Anthony Albanese and New Zealand's Foreign Minister Winston Peters have joined a growing chorus of leaders and international figures calling for de-escalation in the Middle East after strikes resumed.

Speaking at a press conference in Queensland, Albanese said the continuing conflict was having a huge impact on the global economy, and it needs to end soon.

"What we want to see is that de-escalation. We want to see the conflict end, because it is having a massive impact on the global economy," Albanese said.

Similarly, Peters - of the populist New Zealand First Party - echoed similar sentiments.

"Iran's actions violate the ceasefire and are unhelpful for peace negotiations," he said on X.

"We reiterate the urgent need for de-escalation. Iran must honour its commitment to the ceasefire and respect international law, including the protections afforded to civilians and civilian infrastructure."

A news agency close to the Iranian regime claims five civilians were killed after cargo boats were attacked by US ships.

Tasnim News Agency said two small cargo boats were hit in the strikes, rejecting claims made by the USA that the boats targeted were connected to the regime.

"Following the false claim by the US military that it had targeted 6 Iranian speedboats, since none of the IRGC combat vessels had been hit, an investigation was conducted into the nature of the claim from local sources," a military source was quoted as saying.

"It was determined that the American aggressive forces had attacked 2 small boats carrying people's cargo that were moving from Khasab on the coasts of Oman towards the coasts of Iran."

It insisted the USA must face responsibility for the attack, referencing US President Donald Trump's Project Freedom, which began today.

Germany's Chancellor Friedrich Merz has accused Iran of holding the world hostage after its latest strikes on the UAE.

"Tehran must return to the negotiating table and stop holding the region and the world hostage: The blockade of the Strait of Hormuz must end. Tehran must not acquire a nuclear weapon. There must be no further threats or attacks against our partners," Merz said in a post on X.

It's a strong change from his previous rhetoric, where he claimed the United States was being "humilliated" due to the war and their blockade of the Strait of Hormuz.

He may have decided to change tack after US President Donald Trump said he would withdraw at least 5000 troops from Germany.

One of Donald Trump's main war goals remains as far off today as before the war started, according to a Reuters report.

US intelligence assessments indicate the time Iran would need to build a nuclear weapon has not changed since mid-last year, when analysts estimated that a US-Israeli attack had pushed back the timeline to up to a year, according to three sources familiar with the matter.

The assessments of Tehran's nuclear program today remain broadly unchanged after two months of a war Trump launched in part to stop the Iranian regime from developing a nuclear bomb.

The unchanged timeline suggests that curtailing Iran's nuclear ‌ambitions may require destroying or removing the country's remaining stockpile of highly enriched uranium.