Is it safe to use credit cards in Apple Wallet after a hacked account?

It's very, very safe.

Apple Wallet does not store any card information on device. It keeps an encrypted package that neither Apple nor merchants can access.

The encrypted package does to contain card information, it contains a device account number that is sent to your bank during transactions and only your bank can decrypt and only they can link to your payment method to process a charge.

Apple Wallet may pick up cards you have added to your Apple Account and viceversa. Apple Wallet has no knowledge of the card being blocked, just that's on your apple account and can be used for Apple Pay.

With that said, if your wife's payment method is added to your account which is why it appears as an option in the Wallet app, then it's likely getting used to pay for whatever you are buying.

Are you sure it was a hack and not you misunderstanding what is happening?

Did you add her card to your Apple account? Are you maybe actually sharing apple accounts? You say your email is updated on her account, that does not make sense, since each account needs its own email address, and addresses used with one Apple account cannot be used with another. How would your email address be non her account?

There seems, to be some missing context here.

Your bank sent the notification about using the card, not Apple. Apple Wallet has never been hacked, your spouse used the physical card or virtual card (not Apple Pay) and the numbers were skimmed or a data breach occurred at the merchant or bank.

If the Wallet had been hacked, all they would have received was a dynamic token, good for only one transaction. After each transaction the number is changed dynamically.

Once the scammers obtained the physical or virtual card numbers, they made purchases at the Apple App Store.

Report the fraud to the fraud department at the bank that issued the card.