Oil prices may have dropped nearly 20% in May, as markets discount an agreement between the US and Iran, but for millions of European consumers the damage has already been done.
According to a new survey by European Central Bank, The war in the Persian Gulf activated one «double trauma» which now shapes the way citizens see the economy: on the one hand its memories post-pandemic inflation explosion On the other handthe shock of the energy crisis which followed the Russian invasion of Ukraine.
The war that awakened old fears
The economy doesn't just work with numbers. It also works with memories.
That is exactly what the ECB economists find. Europeans do not treat war with Iran as a single geopolitical event. They see him in the light of what they have lived in recent years: Energy accounts launched, food prices who escaped all control and constant pressure on disposable income.
The new crisis did not find consumers in «neutral soil». He found a society that has not yet forgotten the previous shock.
ECB researchers are talking about «double scar» – double psychological and economic «Mark», «injury», which makes citizens more vulnerable to fear and more pessimistic for the future.
The ghost of stagnation returns
The evidence is revealing. Just a month after the war began in late February, Europeans revised upwards their inflation expectations 2.5 percentage points.
At the same time, expectations for economic growth declined by 1.2 percentage points.
In other words, citizens expect higher prices and lower growth.
This is the definition of stagnation, Every central bank nightmare.
Although the situation has not reached the levels of panic caused by Russia's invasion of Ukraine in 2022, the ECB warns that consumers may overreact, turning short-term fears into long-term economic behavior.
The wallets are closing
According to CNBC's report the change is not only recorded in polls. It begins to be imprinted and the cashiers.
Consumers now appear much more selective in their markets, limiting their costs even when they have not suffered direct economic damage.
Increases in food and fuel prices continue to function as a daily reminder that the crisis can return at any time.
The retailers notice that consumers compare prices more, defer purchases and They turn to cheaper alternatives.
Economic insecurity has now become a permanent characteristic of consumer behaviour.
Oil falls, but not enough
Despite the major correction in May, oil is still about 30% higher than the pre-war levels in Iran.
This explains why the markets They're not convinced the crisis is over. Even if there is an agreement and they fully reopen Straits of Hormuz, economists consider inflation likely to remain in several developed economies between 3% and 4%.
Much lower than the peak of the 2022 crisis, but high enough to continue pushing households and businesses.
The biggest threat may not be oil
The real problem for the European economy may not be energy prices.
It's psychology. The ECB finds that every new geopolitical crisis now has a greater impact on citizens' expectations than in the past. Consumers react not only to what is happening today but also to what is happening They're afraid they might happen tomorrow.
And when fear leads to a limitation of consumption, the economy slows down even before the real damage occurs.
That is why central bankers are now watching with the same attention όχι μόνο τις τιμές του πετρελαίου, αλλά και τη διάθεση των καταναλωτών.
Γιατί οι πληγές του προηγούμενου πληθωριστικού σοκ μπορεί να αποδειχθούν πιο ανθεκτικές από τον ίδιο τον πληθωρισμό. Και ο πόλεμος στο Ιράν δείχνει ότι αρκεί μια νέα κρίση για να ανοίξουν ξανά.
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