Charting the Global Economy: War pushes up prices, dents growth

The impact of the Iran war continues to ripple across the world economy, pushing up prices and denting the outlook for growth.

The European Central Bank raised interest rates for the first time in nearly three years, and inflation in the US accelerated to the fastest pace since 2023.

The World Bank now sees the global economy growing this year at the slowest pace since 2020 as the sharp increase in energy prices fuels a new inflation wave.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:

US

US inflation accelerated in May to the fastest pace in more than three years as the Iran war pushed up energy prices, outstripping Americans’ pay gains. The consumer price index climbed 4.2% from a year earlier, the most since early 2023, according to Bureau of Labor Statistics data out Wednesday. Real average hourly earnings fell 0.7% from a year earlier, the biggest drop in more than three years.


AI, driver of growth in America’s economy and creator of record wealth in its stock markets, has also become part of the country’s latest inflation problem. Software and computer accessories, which usually trend cheaper as technology improves, were up a record 14.5% in May from a year earlier.


US consumer sentiment rose in early June for the first time in four months as lower gasoline prices provided some relief for Americans grappling with a surge in inflation. The University of Michigan’s preliminary sentiment index increased from a record low in May. Even so, overall sentiment remains depressed amid the Iran war and the wave of inflation it sparked.

Europe

The European Central Bank raised interest rates for the first time in almost three years, with President Christine Lagarde warning inflation triggered by the Iran war is widening beyond just energy. The hike is the first policy reaction by a major central bank to the jump in oil prices triggered by the Middle East conflict.


The politics of Brexit are changing. Ten years after the UK’s vote to leave the European Union, polls regularly show a majority in favor of rejoining the bloc. But undoing the damage won’t be easy.

Asia

China’s exports jumped more than 19% from a year earlier as booming demand for artificial intelligence hardware offsets disruptions from the war in Iran. Imports soared more than 27% in May, leaving a trade surplus of $105.4 billion, the biggest since January, with companies loading up on foreign chips and equipment.


Japan’s small firms, which employ the bulk of the nation’s company employees, may have trouble sustaining wage growth as the Middle East conflict drives up input costs and squeezes profit margins, putting a key pillar of growth at risk. More than 80% of unions affiliated with the Japanese Federation of Energy and Chemistry Workers’ Unions said the impact of the Iran war will likely affect future wage talks, according to a survey conducted by the group.


South Korea’s economy grew faster at the start of the year than initially estimated, reinforcing the central bank’s increasingly hawkish stance as an artificial intelligence-led export boom fuels business activity. The data add to evidence that gains from the global AI boom continue to spread through South Korea’s economy.

Emerging Markets


Chile’s consumer prices rose much less than forecast last month, handing central bankers good news as they monitor the inflationary fallout from a fuel cost hike before their upcoming interest rate decision. Prices increased 0.2% in May from April, below all estimates in a Bloomberg survey of analysts.


Ghana’s economy grew at a faster pace in the first quarter, buoyed by its strongest industrial-sector performance in nearly two years as higher mining output helped cushion the impact of rising energy and food costs stemming from the war in Iran.


The number of oil tankers crossing Egypt’s Suez Canal surged by almost a third in April and drove revenue to the highest since early 2024, as the closure of the Strait of Hormuz spurred an alternative Red Sea energy route. A total of 529 tankers transited that month, 28% more than the year before, according to state statistics agency CAPMAS.

World

In addition to the ECB, the central bank of Denmark also raised interest rates. Canada, Serbia, Turkey, Kenya and Peru kept interest rates unchanged.


The World Bank cut its outlook for global growth this year and said two-thirds of economies have seen prospects deteriorate as the Middle East war disrupts commodity flows and raises the cost of imports. The world economy will expand 2.5% in 2026, the Washington-based lender estimates. That would be the lowest figure since Covid-19 triggered a global recession in 2020.