Iran war drives sharp drop in Euro zone and Australian household spending

The European Central Bank reported that the outbreak of the Iran war caused Euro‑zone household consumption to fall sharply in April, with nominal growth slipping to about 2.5% year‑on‑year. The decline, driven mainly by higher‑income households cutting discretionary purchases, was twice the size of historical trends and similar to the consumer response to Russia’s invasion of Ukraine in early 2022. Survey respondents also feared that inflation sparked by the conflict would erode real incomes.

In Australia, analysts said the war’s impact on oil markets and rising fuel prices is being watched closely as the Australian Bureau of Statistics prepares to release monthly household‑spending data. The end of a temporary fuel‑excise cut and ongoing disruptions in the Strait of Hormuz have kept inflation pressures high, prompting the Reserve Bank of Australia to monitor consumer confidence ahead of its August 11 cash‑rate decision. An upcoming OPEC meeting is also expected to influence oil supply and price dynamics.