The American President Donald Trump has continued to hold the world hostage to his own ego as he seeks a face saving way out of his monumental mistake in attacking Iran. He continues to insist it’s the only way to stop Iran acquiring nuclear weapons though the imperfect Joint Comprehensive Plan of Action that Obama signed in 2015 was doing a better job at that.
A quick survey of the economic position from various countries around the world shows the impact that the continuing double blockade of shipping from the strait of Hormuz is having.
In Japan, a large snackfood brand – Calbee Inc – has had to redesign some of its packaging for monochrome printing because of shortages in ingredients used for ink colours as a direct result of the closure of the strait of Hormuz. This affects products such as crisps and prawn crackers. The ingredient in question is likely to be naphtha, a liquid hydrocarbon mixture that comes from refining crude oil. It’s used as a solvent in some inks and is also present in the cleaning fluids used on some printing presses. Japan imports roughly 40 percent of the Naphtha it uses from the Middle East, leaving many Japanese ink manufacturers scrambling to reorganise their supply lines.
In India, the prime minister Narendra Modi has asked people to work from home, share car journeys and limit foreign travel to reduce the country’s energy requirement. This is a direct result of the Middle East conflict, with India importing 90 percent of the oil it uses, much of it from Iran. The energy issue is fueling rising inflation in India
Inflation in the Philippines has jumped from 4.1 percent in March to 7.2 percent in April. The Philippines declared a national emergency in March, with its government offering subsidies to transport drivers, reducing ferry services and implementing a four-day working week for civil servants.
Germany has cut its projected tax revenue for 2026-2030 by around €70bn, with Lars Klingbeil, Germany’s finance minister, blaming this on the global energy shock caused by the conflict with Iran.
Meanwhile, a German court has ruled that shrinkflation of chocolate bars cheats consumers and breaks competition law. Mondelez had cut the weight of its Alpenmilch bar from 100g to 90g but kept the same packaging, making it hard for consumers to notice the difference, though they did notice the price going up. The company has a month to appeal the decision. Rising chocolate prices are due to crop failures which some see as a direct result of climate change.
Despite predictions that the on/off war in the Middle East would affect American jobs, the US economy recorded an extra 115,000 jobs in April, which was nearly double what had been expected. Unemployment, according to the US Bureau of Labor Statistics was static at 4.3 percent. However, there is also slow wage growth and rising gasoline prices.
The US did see a jump in inflation to 3.8 percent, largely driven by high energy costs, as well as pricing in housing and food – all as a result of the war with Iran. Average wages have risen by 3.6 percent. Unleaded petrol is up 5.4 percent to $4.50 per gallon, the highest level since July 2022. The average cost of flights in the US have risen even more dramatically, up by 20.7 percent. Consequently, most economists believe that the Federal Reserve will hold interest rates to prevent inflation growing. This is despite Trump’s pressure for rate cuts, which will make life difficult for Kevin Warsh, Trump’s pick to take over from Jerome Powell as chair of the US central bank.
In contrast, the UK economy beat all predictions to grow by 0.3 percent in March, though most economists warn that this merely means the full impact of the Iran conflict will be delayed till later in the year. That’s partly because of the Office for National Statistics belief that many people simply brought forward planned purchases to avoid the expected higher prices later. Overall, UK GDP grew by 0.6 percent in the first quarter of this year, mostly led by retailing and construction.
Meanwhile, the British government is offering light entertainment with a slow drawn out collapse. Anyone who has watched England play cricket will know that collapsing from a position of strength is somewhat of a British speciality. The Labour government took a beating at this month’s local government elections from voters, disillusioned at rising costs and little sign of the changes they hoped for. The election round included seats in the devolved governments and laid bare just how disunited the United Kingdom is. The three smaller nations – Scotland, Wales and Northern Ireland – are now all led by pro-independence parties who have said they will work together to extract more concessions from the central government.
The results led to many voices from across the country calling on the British prime minister, Keir Starmer, to resign – including from over 90 of his own MPs. The former ministers Jess Philips and Wes Streeting articulated the main issue – that Starmer has been too timid and squandered Labour’s huge parliamentary majority so that people have not seen enough of the change they voted for. The Labour faithful want the Manchester Mayor Andy Burnham to run for the leadership. He still has to win a seat in an upcoming by-election, which is unlikely to happen before mid-June.
The drama over the leadership uncertainty caused rising government borrowing costs, up to 5.13 percent, which is the highest since the height of the global financial crisis in 2008. The most obvious loser in any leadership election is likely to be the chancellor, Rachel Reeves, as any candidates – including Starmer himself – are most likely to tack to the left to court the majority of Labour MPs. That would require a completely new economic outlook and a different set of fiscal rules that only a new chancellor could deliver. Otherwise, the new boss will just be the same as the old boss.
Nessan Cleary 
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