Almost all Australia's live sheep exports last year were sent to the Middle East, which is also one of its largest wheat customers. Live cattle exports to Indonesia are also being rebuilt after a row over welfare concerns.
Foreign Minister Julie Bishop has been caught in the fallout.
She has issued new warnings that the more than 100 Australians fighting in Syria and Iraq pose significant potential threats on their eventual return home, with many radicalised and a number rising to prominence in preaching radical Islam to the world.
Some are also believed to be fighting with the Islamic State of Iraq and the Levant (Isis), accused of mass murder and brutality in its war against the Iraqi Government.
Now Bishop is working to calm tensions on another front after a statement by Attorney-General George Brandis to the Senate in which he changed Australia's official description of East Jerusalem as "disputed" rather than "occupied".
East Jerusalem came under the control of Israel following the Six-Day War of 1967 and has been a flashpoint since. The United Nations Security Council, in a long series of resolutions, has since described the area as "occupied".
But Brandis told the Senate: "The description of East Jerusalem as Occupied East Jerusalem is a term freighted with pejorative implications, which is neither appropriate nor useful.
"It should not, and will not, be the practice of the Australian Government to describe areas of negotiation in such judgmental language."
Islamic nations were infuriated, passing the issue to a meeting of the Organisation of Islamic Cooperation in Saudi Arabia and demanding a mass meeting between Bishop and ambassadors and other Islamic representatives in Canberra.
Bishop described the meeting as "constructive" and emphasised that while the wording of Australia's position had changed, its policy had not.
In a letter to the delegation released after the meeting, she said: "I emphasise there has been no change in the Australian Government's position on the legal status of the Palestinian Territories, including East Jerusalem. Our position is consistent with relevant UN resolutions on the issue.
"Senator Brandis' statement was about nomenclature, and was not a comment on the legal status of the Palestinian Territories."
Brandis later told ABC TV: "I represent the Foreign Minister in the Senate. I was asked some questions in Senate Estimates and to avoid confusion, the morning after I answered those questions and in consultation with the Foreign Minister I read into the record a statement authorised by her.
"It is perfectly obvious from that statement that there was never any policy change.
"Australia has always and continues to support the two-state solution and I've got nothing to add to what has been said, what I said in the Senate Estimates Committee and what the Foreign Minister has said."
The explanation failed to silence concerns.
"I think there is sort of a change in the language, a change also of the policy," Izzat Abdulhadi, head of the Palestinian delegation to Australia, told reporters.
He urged that Australia "adhere to its obligations under international law" and to the Security Council's resolutions.
In Saudi Arabia, the OIC issued a statement condemning the change of wording, describing it as "a policy in clear violation of international law and the relevant UN resolutions" and warning that the Islamic states would "follow up and take actions necessary to respond and uphold international law".
While the meeting with Bishop appeared to have calmed immediate talk of trade sanctions, they remain on the table. The OIC said it would investigate all options if Australian policy shifted.
