Workers across major advanced economies are once again struggling to keep pace with rising living costs as the ongoing Iran conflict drives up energy prices and disrupts global supply chains.
According to a report by the Financial Times, households in the United States, the United Kingdom and several European countries are now paying more for petrol, flights and everyday essentials following the closure of the Strait of Hormuz, one of the world’s most important energy shipping routes.
Economists warn that the renewed surge in prices could weaken consumer spending and further slow economic recovery.
In the United States, inflation rose to 3.8 percent in April, while average hourly earnings increased by 3.6 percent during the same period. It marks the first time in two years that inflation has outpaced wage growth.
“The war is roiling supply chains and will push prices higher [than] before, even if the strait were to open tomorrow,” economist Diane Swonk said.
In the United Kingdom, workers are also beginning to feel the pressure. Real wage growth excluding bonuses dropped to 0.1 percent in the three months leading to March, with analysts predicting it could soon turn negative as inflation rises and hiring slows.
The eurozone is also facing renewed economic strain. Workers across the region are still recovering from the inflation crisis of 2022, and experts say the latest energy shock could erase recent gains.
Claus Vistesen said he expects wage growth across the euro area to remain close to zero throughout 2026, warning that conditions may already be “deeply negative” in countries like France.
Economists say governments and central banks are now dealing with two major concerns: weaker household spending and the possibility of workers demanding higher salaries, which could trigger even more inflation.
Michael Feroli linked the decline in real wages directly to the Middle East crisis, saying it was “all about the Middle East conflict.” He added that wage growth could improve if the Strait of Hormuz reopens and energy prices stabilise.
Swonk, however, cautioned that continued inflation could hurt businesses and employment.
“It is in that way that persistent bouts of inflation become a labour market problem,” she said, warning that higher costs would “narrow profit margins and take a toll on hiring.”
Analysts further warned that although the current energy shock is not yet as severe as the 2022 crisis, it could still push the eurozone into a mild recession.
