War-driven energy shock
Reporting finds the Middle East conflict is producing an energy shock that’s lifting fuel costs while dragging down consumer sentiment across markets. Coverage says higher petrol prices are flowing into transport and food costs and helping push headline inflation higher even as household confidence weakens. (economictimes.indiatimes.com, freemalaysiatoday.com)
The war in the Middle East has turned into an energy shock, pushing fuel prices higher and knocking consumer confidence lower across major economies. (imf.org) In the United States, the national average for regular gasoline rose above $4 a gallon in early April for the first time since August 2022, reaching $4.08 on April 2 and $4.16 on April 9, according to AAA. (newsroom.aaa.com, gasprices.aaa.com) March inflation data showed how quickly that hit households: the United States energy index rose 10.9% in one month, gasoline jumped 21.2%, and gasoline accounted for nearly three quarters of the monthly increase in the Consumer Price Index. (bls.gov) Consumer sentiment is falling at the same time. The University of Michigan said its sentiment index dropped to 53.3 in March from 56.6 in February, with middle- and higher-income households hit by rising gas prices and market volatility after the Iran conflict began. (sca.isr.umich.edu) The shock is spreading through trade routes as well as fuel pumps. The International Monetary Fund said about 25% to 30% of global oil and 20% of liquefied natural gas move through the Strait of Hormuz, leaving energy importers in Asia and Europe exposed to higher costs. (imf.org) Those higher fuel costs do not stay inside the energy sector. The International Monetary Fund said parts of the Middle East, Africa, Asia-Pacific, and Latin America are also facing higher food and fertilizer prices and tighter financial conditions as transport and input costs rise. (imf.org) Asian governments are already revising forecasts. In Singapore, Deputy Prime Minister Gan Kim Yong told Parliament on April 7 that 2026 inflation is now expected to run above the earlier 1% to 2% range because of the ongoing Middle East conflict. (asiaone.com) The Asian Development Bank also cut its regional outlook, saying on April 10 that the conflict is set to weigh on developing Asia and the Pacific, with growth projected at 5.1% in both 2026 and 2027 under an early stabilization scenario. (adb.org) Oil traders are now treating the conflict as a supply problem, not just a headline risk. Reuters reported on April 10 that analysts expect the war shock to push the oil market into a supply deficit in 2026 after earlier forecasts had pointed to oversupply. (usnews.com) That leaves central banks and finance ministries facing the same bind seen in past oil shocks: weaker demand, higher headline inflation, and less room to cushion households if fuel stays expensive. The International Monetary Fund said on April 14 it will publish a fuller assessment in its World Economic Outlook. (imf.org)
