{"id":3484,"date":"2026-06-18T19:00:49","date_gmt":"2026-06-18T19:00:49","guid":{"rendered":"https:\/\/trusteconomics.eu\/?p=3484"},"modified":"2026-06-18T19:00:49","modified_gmt":"2026-06-18T19:00:49","slug":"the-war-in-iran-is-over-prices-are-skyrocketing-wages-are-disappearing-the-cost-of-living-is-increasing","status":"publish","type":"post","link":"https:\/\/trusteconomics.eu\/index.php\/2026\/06\/18\/the-war-in-iran-is-over-prices-are-skyrocketing-wages-are-disappearing-the-cost-of-living-is-increasing\/","title":{"rendered":"The war in Iran is over – Prices are skyrocketing, wages are disappearing, the cost of living is increasing"},"content":{"rendered":"\r\n\r\nThe economic suffocation is returning more severely, as the new wave of price increases threatens to flatten consumers\u2019 purchasing power.\r\n\r\n \r\n\r\nWith wages stagnating and the prices of basic goods soaring, everyday life is turning into an endless struggle for survival. An uncontrolled increase in the cost of living is already at the gates, ready to sweep away family budgets.\r\n\r\n \r\n\r\nMore specifically, inflation is returning dynamically worldwide, to 2022-style levels. The war with Iran is only half the problem. The prospect of inflation above 2% has been looming over the global economy since the pandemic.\r\n\r\n \r\n\r\nBut just when it seemed the Fed and ECB had managed to escape unpopular interest rate hikes, the war with Iran dragged them back on that path.\r\n\r\n \r\n\r\nFor example, producer prices rose 6.5% over the past year, according to the US Bureau of Labor Statistics, the steepest annual increase since November 2022.\r\n\r\n \r\n\r\nA day earlier, consumer prices rose 4.2%, the highest level since 2023. Both increases are due to soaring energy costs, as the Strait of Hormuz remains effectively blocked.\r\n\r\n \r\n\r\nThe wholesale price of gasoline jumped more than 23% in a month, according to the same agency, dragging up everything that depends on fuel: jet fuel, freight, road transport, diesel. Agricultural raw materials as a whole rose by 14% in May alone.\r\n\r\n \r\n\r\nThe so-called \u201cstructural\u201d producer price index, which excludes volatile food and energy prices, rose by 0.4%, below the average estimate of 0.5% \u2014 which suggests that inflation is not expanding from month to month.\r\n\r\n \r\n\r\nReferring to the price outlook, Lagarde stressed that overall inflation is expected to average 3.0% in 2026, but the American tsunami of increases will not leave us unscathed.\r\n\r\n \r\n\r\nTrust Economics said in a note that the data was \u201chigher than expected overall, but softer at the core\u201d \u2014 a sign, it wrote, that \u201cthe pass-through of producer inflation from energy to broader prices remains relatively limited for now.\u201d\r\n\r\n \r\n\r\nFor now, much of this pass-through is being absorbed, Trust Economics said, by \u201cmargin pressures\u201d: companies are absorbing higher costs rather than passing them on to consumers.\r\n\r\n \r\n\r\nBut that cushion is showing signs of weakening: trade margins fell in May at the fastest pace in nearly a year.\r\n\r\n \r\n\r\nBut more broadly, this is not a May or April problem; it is not even a purely American problem. Inflation is making a strong comeback globally.\r\n\r\n \r\n\r\nBeyond the core figure, the measure that excludes food, energy and trade rose 5.1% year-on-year, the biggest increase since October 2022.\r\n\r\n \r\n\r\nDeeper down the trade chain, prices for processed goods used by businesses rose 13.3% year-on-year, the strongest gain since August 2022, while raw, unprocessed inputs jumped 22.2%, the fastest pace since September of that year.\r\n\r\n \r\n\r\nTo be fair, U.S. consumer inflation at 4.2% remains less than half the high of 9.1% in June 2022, while prices in the eurozone are rising at a rate of 3.2%, compared with the more than 8% the European Central Bank was targeting the last time it raised interest rates. But the shape of this shock is beginning to take shape.\r\n\r\n \r\n

Europe raises interest rates<\/strong><\/p>\r\n \r\n\r\nThe European Central Bank raised interest rates for the first time since 2023 on Thursday, June 11, just minutes before the US data was due to be released.\r\n\r\n \r\n\r\nECB President Christine Lagarde made it clear that the move was a result of the war in Iran, calling it a \u201cmajor energy shock\u201d and warning that price stability was at risk: \u201cWe have inflation that is too high for our citizens.\u201d\r\n\r\n \r\n\r\nUnlike US central bankers, the ECB made it clear in its statement that this was not a temporary effect but a more permanent change \u2014 \u201cresilient across all scenarios\u201d \u2014 and markets got the message, pricing in further hikes later in the year.\r\n\r\n \r\n\r\nThe same forces are at play in Asia. China, which has been struggling to combat deflation for years, posted its highest wholesale inflation in nearly four years, partly because of the war in Iran, which is driving up the cost of goods.\r\n\r\n \r\n\r\nBut the Chinese data revealed a second inflationary force: the global boom in artificial intelligence, which is driving up the prices of chips and equipment \u2014 and, as newly wealthy tech workers cash in on vested shares, fueling a spending spree on luxury goods that is further fueling demand.\r\n\r\n \r\n\r\nInfrastructure development is starting to have the same effect on the other side of the Pacific.\r\n\r\n \r\n\r\nAs companies plan to spend trillions on data centers, memory and semiconductors \u2014 while chip supply is flat in the short term \u2014 prices have risen rapidly.\r\n\r\n \r\n\r\nThese components have risen nearly 27% in a year, and the increases will soon affect cellphones, laptops and other personal technology. Households don\u2019t have to wait to feel the pinch.\r\n\r\n \r\n\r\nReal weekly wages fell 0.7% last year, the worst decline since early 2023, meaning prices are rising faster than wages, so the average worker can buy less than they did a year ago, despite earning more in nominal terms.\r\n\r\n \r\n\r\nThe increases are hitting consumers hardest where they can\u2019t avoid them: fuel, electricity, food, health care.\r\n\r\n \r\n\r\nWith Americans watching an upper-class tech elite become incredibly wealthy from stock gains, it\u2019s perhaps no wonder that consumer sentiment has hit a nadir.\r\n\r\n \r\n\r\nThe political fallout is further weighing on the White House. Trump\u2019s net approval rating has fallen to -25 points in The Economist\u2019s index \u2014 the worst performance for any president since he took office in 2009 \u2014 and just 22% of Americans approve of his handling of the cost of living, according to Reuters\/Ipsos data.\r\n\r\n \r\n

Warsh inherits Powell\u2019s problem \u2014 and Powell too<\/strong><\/p>\r\n \r\n\r\nThe data leaves the new Fed Chairman, Kevin Warsh, with the same problem that his predecessor, Jerome Powell, had: are these inflationary shocks temporary spillovers or are they embedded in the price structure?\r\n\r\n \r\n\r\nAn oil shock is not something that interest rate hikes can fix.\r\n\r\n \r\n\r\nBut if inflation is the result of a broader overheating economy \u2014 too much easy money, explosive demand without matching supply \u2014 then the Federal Reserve should raise interest rates.\r\n\r\n \r\n\r\nAnd Warsh, whom Trump installed hoping for rate cuts, instead inherits an economy where cuts would seem reckless. Whether Warsh can move flexibly is another question. He arrives at a Federal Open Market Committee that is the most divided in a generation \u2014 four of the twelve members dissented at the April meeting, the deepest rift since 1992.\r\n\r\n \r\n\r\nThe committee is more hawkish than Warsh and may view the newcomer with suspicion. The May report even contains the \u201cWeber position\u201d in miniature.\r\n\r\n \r\n\r\nIf you look at the commodity data, the redistribution mechanism is right there in front: pork prices fell 10.1%, and residential electricity prices fell \u2014 little consolation for households \u2014 while the biggest contributor on the services side was investment portfolio management fees, up 4.8% on a strong stock market rally.\r\n\r\n \r\n\r\nIn the same month that real wages recorded their worst annual decline in three years, the service that rose the fastest was wealth management fees.\r\n\r\n \r\n\r\nMarkets are now pricing this week\u2019s meeting as a near-certainty of a rate hike, with a growing minority betting on the next move as a hike.\r\n\r\n \r\n\r\nThe easing everyone had been waiting for in 2026 has vanished. The president, for his part, is not worried. \u201cI love inflation,\u201d Donald Trump told reporters on Wednesday, June 10, predicting that prices will \u201cdrop like a stone\u201d once the war is over.\r\n\r\n","protected":false},"excerpt":{"rendered":"

The economic suffocation is returning more severely, as the new wave of price increases threatens to flatten consumers\u2019 purchasing power. With wages stagnating and the prices of basic goods soaring, everyday life is turning into an endless struggle for survival. An uncontrolled increase in the cost of living is already at the gates, ready to … <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19],"tags":[834,44,972,435,533],"class_list":["post-3484","post","type-post","status-publish","format-standard","hentry","category-economics","tag-cost-of-living","tag-inflation","tag-iran","tag-jerome-powell","tag-wages"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t