The Reserve Bank of Australia (RBA) is most likely to raise the cash rate in May after the latest jobs data, which confirmed the economy is likely heading into a drawn-out tightening cycle into 2027, Bendigo Bank's Chief Economist, David Robertson, said in a report on Thursday.

Recent RBA comments on labor markets noted that conditions are stronger than expected, adding to capacity pressures, per the report. The next two jobs reports, out on March 19 and April 16, will be important for the May RBA cash rate decision, assuming it remains on hold in March.

The price of oil was already rising before the start of the conflict in the Middle East over the weekend, but "rose a further 20% as events became more complex this week," boosting concerns that a prolonged conflict could see further upside risks to energy prices. The prospect of these likely higher oil and commodity prices adds to inflationary risks.

Despite the prospect of slightly higher cash rates, trade uncertainty via tariffs, and recent military conflicts, stock markets gave up only a fraction of the gains seen over the last 12 months, Robertson added.