Charting the Global Economy: War Fuels Inflation, Saps Sentiment

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(Bloomberg) — Surging fuel costs stemming from the Iran war are sparking a rapid run-up in inflation and sinking consumer confidence.

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In the US, a record increase in the cost of gasoline sparked the steepest advance in a closely watched measure of consumer prices in nearly four years. Consumers in both the world’s largest economy and Canada have become more pessimistic, with sentiment in the US tumbling to a record low.

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With the situation for oil producers and refineries in the Middle East remaining murky despite a US-Iran ceasefire, inflation will likely remain elevated for months. Meanwhile, New Zealand and India were among a number of central banks keeping interest rates unchanged this week as inflation fears reverberate worldwide. 

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

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World

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Saudi Arabia’s oil exports via the Red Sea are holding steady for now, as the impact of a drone attack on its vital cross-country pipeline has yet to filter through. The strike on Wednesday — hours after a ceasefire was declared in the Iran war — damaged one of 11 pumping stations along the 746-mile (1,200-kilometer) conduit from oil fields in the east to the Red Sea coast in the west. That has reduced throughput by 700,000 barrels a day, the state-run Saudi Press Agency said Thursday.

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Saudi Arabia said a series of attacks on its critical energy infrastructure disrupted oil and gas production and hit supply to global markets that are already reeling from the Iran war. Global markets and economies have been upended by the energy shock caused by Iran’s effective closure of the Strait of Hormuz, the chokepoint at the mouth of the Persian Gulf.

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The central banks of New Zealand, India, South Korea, Poland, Romania, Peru, Kenya and Serbia all held interest rates steady against a backdrop of greater inflation risk from higher oil prices.

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US & Canada

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US inflation surged in March by the most in nearly four years as the war with Iran sent gasoline prices skyrocketing. Despite the 21% rise in gas prices, increases in other categories were relatively tame in March. 

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US consumer sentiment fell in recent weeks to a record low, indicating Americans’ increasing worries about mounting inflation due to the Iran war. Consumers’ perceptions of their current financial situation matched the worst since 2009. 

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Canadian consumer confidence fell to its lowest level in almost a year as the war in Iran sent energy prices soaring and stoked worries about persistent inflation. Just 15% of Canadians see a stronger economy six months from now, compared with 27% four weeks ago.

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Skyrocketing fuel prices due to the Iran war are fanning the embers of transportation inflation, which were already rising due to a shrinking pool of drivers in the US. Trucking operators have seen diesel prices spike by almost 50% since the start of the US-Israel war against Iran at the end of February.