Even if the war is far away, price hikes come quickly - The day "war inflation" shakes the global economy

The Impact of War First Appears in Economic Indicators

About three weeks have passed since the conflict in the Middle East escalated. As a preliminary "health check" on how much the global economy is starting to suffer, attention is focused on the March economic sentiment indices from the U.S. to the Eurozone. The Purchasing Managers' Indices of various countries are generally expected to decline, and weakness may spread beyond manufacturing to the service sector. In other words, this shock is not limited to certain resource-rich or importing countries but is beginning to spread as a synchronous deceleration pressure on the entire global economy.

The characteristic of this situation is that the impact of the war cannot be dismissed with abstract words like "fear" or "uncertainty." It is already affecting corporate decision-making and household spending behavior in the form of rising energy prices, disruptions in maritime transport, increased production costs, and deteriorating consumer sentiment. Even countries far from the battlefield cannot remain unaffected as long as they depend on imported fuel and are connected to the world through logistics.

The Core Issue Is Not Just "High Oil Prices"

When discussing this economic shock, attention inevitably focuses on oil prices. Of course, this is not incorrect. The Strait of Hormuz is a major artery through which about 20% of the world's oil and LNG pass, and its dysfunction can quickly drive up energy prices. Indeed, after the escalation of the war, oil prices surged, and governments and central banks worldwide could no longer ignore the risk of inflation reigniting.

However, the real challenge is that high oil prices do not end "alone." When fuel becomes expensive, transportation costs rise. As transportation costs increase, there is pressure to pass these costs onto food and everyday goods. If the supply of fertilizers and chemicals is also shaken, agricultural costs and food prices will gradually be affected in a few months. Initially seen as a rise in gasoline prices, this type of shock's fear is that it will, over time, squeeze the entire household expenditure structure.

Central Banks Face a Tough Challenge Again

For central banks worldwide, this is one of the worst types of external shocks. While it is a factor cooling the economy, it simultaneously pushes up inflation. Normally, a slowdown in the economy would be addressed with interest rate cuts, but if price increases driven by high energy prices accelerate again, they may have to adopt a tighter stance. The classic and troublesome choice of "protecting the economy or protecting prices" has once again come to the forefront.

In fact, in the UK, the Bank of England has stepped back from its rate-cutting path and shown a willingness to act if necessary. In the Eurozone, the European Central Bank has raised its inflation forecast due to high energy prices and revised its growth forecast downward. In the U.S., expectations of rate cuts have receded due to rising oil prices, and the market now sees "monetary easing within the year as quite limited." The war has begun to rewrite the scenarios of central banks all at once.

What is important here is that central banks cannot directly lower oil prices. Even if interest rates are adjusted, tensions in the strait will not ease, nor will tanker insurance premiums decrease. Nevertheless, policymakers must prevent high energy prices from spreading to wages and service prices and inflating inflation expectations themselves. That is why the market perceives this shock not as temporary noise but as an "event that disrupts the premise of monetary policy."

The Problem for Households Has Already Begun

This issue is pressing because it does not end with discussions in financial markets. In the U.S., gasoline prices have risen significantly over the past month, with the average price approaching $4 per gallon. A Reuters/Ipsos survey found that 55% feel the impact on their household finances, and 21% said it was a "major blow." Furthermore, 87% expect fuel prices to continue rising. The impact of the war is not an abstract geopolitical issue but a reality recalled with every refueling.

This is not just a story about the U.S. In the UK, it was reported that the government and central bank are holding emergency consultations on how to respond to the rising cost of living due to the war. In Australia and various Asian countries, the rise in imported fuel is raising awareness of inflation and interest rate hike risks. In other words, the central concern for people in any country is almost the same. Before the pros and cons of the war or the details of the war situation, "how much will next month's bill increase" is emerging as a real issue.

What Social Media Reflects Is Not the "Market" but the Anxiety of "Living"

This atmosphere becomes even clearer when looking at social media. On X, posts primarily from market participants and economic accounts succinctly illustrate the chain of "high oil prices → inflation reigniting → rate cuts receding" are spreading. Posts by travel journalists share the view that tensions in the Strait of Hormuz will affect not only gasoline prices but also airfares and travel costs, while posts by TV reporters express concern that the next impact will be on food prices.

On the other hand, reactions on Reddit are closer to real-life experiences. In economic communities, discussions resembling cries of "which to cut, food expenses or gas costs" are prominent, while in investment communities, there is anxiety about "if oil reaches near $120, corporate earnings and interest rate outlooks will collapse." On Australian boards, many see high fuel prices as directly leading to higher supermarket prices, mortgage rates, and burdens on vulnerable people, perceiving the war not as "distant news" but as a "daily cost escalation device."

Of course, the voices on social media are not opinion polls, and emotions and exaggerations are mixed. However, what cannot be overlooked is that the direction of interest is quite consistent. What people fear is not the ups and downs of stock prices themselves. It is changes directly connected to monthly expenses, such as commuting fuel costs, supermarket bills, mortgage interest rates, and rising travel and delivery costs. Social media is often noisy, but this time that noise aligns quite accurately with the sense of life defense.

What Happens if This Shock Prolongs

In the short term, the biggest themes will be the re-acceleration of inflation due to high energy prices and the retreat of rate cuts. However, more serious is the medium-term damage to the psychology of businesses and households. Businesses will be caught between rising costs and slowing demand, making it easier to postpone investment decisions. Households will see their disposable income absorbed by fuel and food expenses, starting to cut back on spending on durable goods, dining out, and travel. If this happens, a slowdown in the economy, including in the service sector, will become a reality.

Moreover, the global economy is not in a state of complete leeway this time. The battle with prices is not over, and there is not much room left in the fiscal and interest rate policies of various countries. Therefore, this war shock is too heavy to be dismissed as merely a temporary surge in oil prices. It shakes the supply chain, monetary policy, and consumer sentiment simultaneously. The lesson from 2022 was that the rise in energy prices lingers in prices longer than imagined. The world today faces the next shock with that memory in mind.

The Cost of War Cannot Be Measured by Distant Explosions

The economic cost of war cannot be measured by the sharp rise in oil charts alone. The real cost appears when central banks in various countries find it difficult to move, businesses become cautious about the future, and households start cutting daily expenses. Moreover, these changes appear in people's conversations and social media posts before they show up in statistics. What is happening now is a phase where the global economy is once again being tested on whether it can withstand "high energy prices," and the answer is already being questioned at gas stations and supermarket checkouts.

Source URL

・Reprint version of an article published in Financial Post, referenced to understand the outlook for worsening economic sentiment indices and the cautious stance of central banks in various countries.
https://theedgemalaysia.com/node/797022

・Reuters article to confirm the impact of the Middle East war on the energy market, the importance of the Strait of Hormuz, and the responses of various countries in terms of energy conservation and consumption reduction.
https://www.reuters.com/business/energy/iran-wars-energy-impact-forces-world-pay-up-cut-consumption-2026-03-21/

・Reuters article to confirm that the European Central Bank raised its inflation forecast due to high energy costs.
https://www.reuters.com/business/ecb-raises-inflation-forecast-higher-energy-costs-2026-03-19/

・Reuters article to confirm that high oil prices have pushed back expectations of a rate cut by the Federal Reserve.
https://www.reuters.com/business/another-oil-price-jump-further-pushes-out-fed-rate-cut-odds-2026-03-19/

・Reuters article to confirm the change in stance of the Bank of England and the reaction of the UK market.
https://www.reuters.com/world/uk/sterling-dips-oil-rises-still-set-weekly-gain-hawkish-boe-2026-03-20/

・Reuters article to confirm the rise in U.S. gasoline prices approaching $4.
https://www.reuters.com/business/energy/us-pump-prices-jump-30-since-middle-east-war-began-headed-toward-4-gallon-2026-03-19/

・Reuters/Ipsos article to confirm survey results showing that rising fuel prices are squeezing household finances.
https://www.reuters.com/business/energy/rising-gas-prices-hitting-us-household-finances-more-pain-is-expected-2026-03-20/

・X post referenced as an example of the shared view on social media of "high oil prices → inflation → monetary policy."
https://x.com/FluentInFinance

・X post referenced as an example discussing the impact on travel costs and fuel prices.
https://x.com/PeterSGreenberg/status/2034340976433766599

・X post referenced as an example expressing concerns about the spillover to food prices.
https://x.com/selinawangtv/status/2033162955018174716

・Reddit thread referenced as an example of discussions on social media about the pressure of "gasoline and living expenses."
https://www.reddit.com/r/economy/comments/1rx3ns1/americans_are_now_choosing_between_food_and_gas/

・Reddit thread referenced as an investor perspective reaction on how high oil prices affect the stock market and corporate earnings.
https://www.reddit.com/r/stocks/comments/1rz6h5y/with_oil_touching_120_is_anyone_actually_doing/

・Reddit thread referenced as a discussion from a consumer perspective in Australia about "high fuel prices → high prices → interest rates."
https://www.reddit.com/r/AusFinance/comments/1rioz45/2026_middle_east_war_what_will_be_the_impact_on/

・Reddit thread referenced as an example of reactions discussing the burden on households and vulnerable people.
https://www.reddit.com/r/AusFinance/comments/1rtxrfv/economic_shock_of_war/