US Inflation Poised to Surge as Iran War Fuels Energy Prices

The annual inflation rate in the US fell to 3.5% in June 2026, the first decline in five months, compared to 4.2% in May and below forecasts of 3.8%. Energy costs increased 15.7%, below 23.5% in May, as the ceasefire between the US and Iran alleviated inflationary pressures from the energy component. Gasoline prices rose 26.7% (vs 40.5% in May) and fuel oil increased 42.9% (vs 58.9%). Inflation also slowed for shelter (3.3% vs 3.4%) and food (3% vs 3.1%). Compared to the previous month, the CPI decreased 0.4%, more than forecasts of a 0.1% drop, and the largest fall since April 2020. Energy costs declined 5.7%, after rising 3.9% in May, 3.8% in April, and 10.9% in March, with gasoline dropping 9.7%. The fall in energy more than offset increases in other indexes including those for shelter (0.1%) and food (0.2%). Meanwhile, annual core inflation eased to 2.6% from 2.9%, below forecasts of 2.8%. Compared to the previous month, core CPI steadied, compared to forecasts of a 0.2% rise.

The annual inflation rate in the US is expected to ease to 3.8% in June 2026 from 4.2% in May, marking its first slowdown in five months after reaching its highest level since April 2023. On a monthly basis, the CPI is forecast to edge down 0.1%, which would be the first decline since May 2020, largely reflecting lower energy prices. Gasoline prices are estimated to have fallen by approximately 9% following the ceasefire between the US and Iran, alleviating inflationary pressures from the energy component. Moderate increases are expected in airfares and rents, while prices for services, particularly hotel and motel accommodations, are likely to rise amid increased demand related to the FIFA World Cup. Motor vehicle insurance prices are also expected to rebound. Meanwhile, core consumer prices likely rose 0.2% for a second consecutive month, leaving the annual core inflation rate unchanged at 2.9%.

The annual inflation rate in the US rose to 4.2% in May 2026, marking its highest level since April 2023, from 3.8% in April and in line with market expectations. This represents the third consecutive monthly acceleration in headline inflation, with energy costs jumping 23.5% (vs 17.9% in April), due to the energy shock triggered by the conflict with Iran. Gasoline prices soared 40.5%, after a 28.4% gain. Fuel oil also increased 58.9% (vs 54.3%). In addition, inflation accelerated once again for shelter (3.4% vs 3.3%) and food (3.1% vs 2.3%). Compared to the previous month, the CPI was up 0.5%, slightly less than 0.6% in April, and in line with forecasts. Energy prices rose 3.9% and accounted for over 60% of the monthly gain. Meanwhile, the annual core inflation rate went up to 2.9%, a new high since September 2025, compared to 2.8% in April and matching forecasts. Compared to the previous month however, the core CPI rose 0.2%, less than 0.4% in April and below forecasts of 0.3%.