Double strangulation of "growth + prices"! The Iran conflict is suffocating the global economy.

The latest business survey shows that the spillover effects of the Iran conflict are severely impacting economic growth momentum and driving up prices, with signs of synchronous fluctuations emerging in the global economy. The Purchasing Managers' Index (PMI) compiled by S&P Global showed a significant decline in March. Data released on Tuesday showed that the Eurozone's overall PMI fell more than economists expected, Australia's composite index plummeted into contraction territory, and India's manufacturing activity slowed to its weakest level since 2021. At the same time, several price indices surged: the input cost inflation rate in Germany, the largest economy in Europe, accelerated to its highest level in over three years, while similar indicators for the UK manufacturing sector recorded the largest increase since 1992. The preliminary data collected at the end of March reflected the increasingly pessimistic sentiment of global businesses as the Iran conflict continues to escalate and the spillover effects continue to expand. Taken together, these indices preliminarily reveal the impact of this conflict on global economic prosperity - it has directly and destructively struck at the critical energy supplies that sustain the major global economies. Policymakers in various countries are highly vigilant. ECB President Lagarde stated last week that the Iran conflict triggered by the U.S. President Trump's attack has exacerbated "inflationary risks and economic growth downside risks". Both the ECB and the Bank of England have shifted to a hawkish stance, with the Eurozone possibly raising interest rates as early as next month; the Bank of Japan is also prepared to take action as early as April, and the RBA has raised rates for the second consecutive time. Economist Jamie Rush said, "Before the outbreak of the Iran conflict, our global growth tracking indicators showed that the world economy was building momentum. However, the latest PMI data from developed economies indicate that this nascent recovery momentum is being stifled by high oil prices, tightening financial conditions, and weak market confidence." The data released on Tuesday did not include U.S. indicators. As of now, all comprehensive PMIs covering manufacturing and services that have been released globally have shown significant declines. In order of publication, these economies include Australia, Japan, India, France, Germany, the Eurozone as a whole, and the UK. Manufacturing activity in the Eurozone unexpectedly improved, but S&P Global analysis pointed out that this may partly be due to customers stockpiling early due to supply concerns. Combined with nearly stagnant services activity in the region and a composite index hitting a ten-month low, the overall situation is not optimistic, especially with significant increases in price indicators. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented, "With the Middle East conflict significantly driving up prices and suppressing growth, the Eurozone PMI flash reading has sounded the stagflation alarm." Black Wednesday The performance of the UK manufacturing sector is also better than the service sector, but the composite PMI is still below expectations. Factory prices have sharply surged, reaching the highest level since the 1992 "Black Wednesday" pound crisis. Williamson said, "The Bank of England is facing a tough choice: when formulating policy, it needs to balance growth and inflation risks - not only to curb runaway inflation but also to avoid a hawkish interest rate path exacerbating the risks of economic downturn." Unexpectedly, Japan's inflation data released on Tuesday slowed down, although the overall economy still shows resilience, business activity indicators still reveal the impact of the conflict. The confidence indicator for the next 12 months has dropped to its lowest level in nearly a year. Data from India shows that economic growth has slowed to its weakest since 2022, while cost inflation rates have hit a four-year high. Australia's economic situation has reversed most dramatically: the composite output index plunged more than 5 points to 47, falling below the neutral 50 line. The service sector performance is weak, coupled with a sharp deterioration in manufacturing momentum, S&P Global data shows that the private sector activity in the country had contracted by the end of the first quarter. At the same time, the S&P Global index shows that the inflation rate for Australian companies has hit a more than three-year high, highlighting the serious challenges currently faced by the RBA. Economists surveyed predict that the PMI data to be released by the U.S. later on Tuesday may show some resilience - manufacturing activity is expected to remain stable, while the service sector may see a slight rebound. Trump claimed that peace talks in the Middle East are underway, even though the conflict between the U.S.-Israel and Iran continues. But even if the conflict subsides, global policymakers still need to evaluate the damage to growth and inflation prospects - damage that may have already derailed their economies. While the S&P Global Index covers a wide range, it can only provide limited assessment clues. Rush pointed out, "The key question affecting future economic prospects is how long the Strait of Hormuz will remain closed and how major central banks will respond to this shock."