Middle East Conflict Drives Inflation Above Wage Growth, Eroding Purchasing Power in the West

Central News Agency (London, May 26) - The conflict in the Middle East is impacting global energy prices, not only suppressing the recovery of real wages but also causing the real purchasing power of workers in wealthy nations to shrink. Experts warn that persistent inflation could evolve into a structural problem for the labor market, making a quick recovery difficult. According to the Financial Times, the ongoing blockade of the Strait of Hormuz has caused global gasoline and airfare prices to soar, placing heavy pressure on consumers in the UK, US, and other regions. In the US, the annual inflation rate in April jumped to 3.8%, while the average hourly wage growth was only 3.6%, marking the first time in two years that price increases have outpaced wage growth. Diane Swonk, Chief Economist at KPMG US, stated, "This war is disrupting supply chains and pushing prices higher than before, even if the strait reopens tomorrow." UK workers are facing similar pressures, and for Eurozone workers, this new shock is compounding previous inflation-related losses. Economists predict that real wage growth in the Eurozone will be near zero by 2026.