Middle East Conflict Fuels Inflation as US Consumer Credit Demand Weakens in May

The Conference Board said the protracted conflict in the Middle East is driving up energy prices and inflationary pressure, eroding US household purchasing power. When consumers are worried about the economic outlook, they typically defer major purchases such as cars, homes and durable goods. That reduces demand for credit cards, auto loans and other consumer credit, weighing on broader economic momentum.

The latest survey showed US consumer confidence declined in May, mainly because of the continuing war involving Iran and rising energy costs. The report did not disclose credit volumes, but projected that reduced household spending on big-ticket items would further weaken credit demand and overall borrowing activity. Markets will also watch upcoming energy-price and inflation data to see whether the trend persists into June and beyond.