US Inflation Poised to Surge as Iran War Fuels Energy Prices

The annual inflation rate in the US slowed for a second consecutive month to 3.4% in July 2026, from 3.5% in June, in line with expectations. Inflation moved further below the 2023 high of 4.2% reached in May, as the impact of the energy shock caused by the war with Iran continued to ease. Gasoline prices rose 24.6% yoy, down from 26.7% in June, while fuel oil prices increased 39.1%, compared with 42.9% previously. Inflation also eased in shelter, to 3.2% from 3.3%, while food inflation remained unchanged at 3%. On a monthly basis, the CPI rose 0.1% as expected, rebounding from a 0.4% decline in June. The index for shelter rose 0.1%, accounting for roughly two-thirds of the monthly increase. Food also went up 0.1%. In contrast, gasoline prices were down 2.9%. Meanwhile, core consumer prices went up 0.2%, following a flat reading in June, while the annual core inflation rate eased to 2.5% from 2.6% in the previous month, matching forecasts.

The annual inflation rate in the US is expected to slow for a second consecutive month to 3.4% in July 2026, from 3.5% in June, easing further from the 2023 high of 4.2% reached in May. On a monthly basis, the CPI is forecast to rise 0.1%, rebounding from a 0.4% decline in June, which marked the first monthly drop since May 2020. Gasoline prices are expected to have fallen nearly 3%, while airfares and jet fuel prices are also likely to have declined. New and used car prices, meanwhile, could see a slight uptick. Core consumer prices are expected to rise 0.2%, following a flat reading in June, while the annual core inflation rate is seen easing to 2.5% from 2.6% in the previous month. That would mark the smallest annual increase since February. Overall, the CPI report is likely to point to a further cooling in energy-related price pressures that intensified in the months immediately following the start of the US war with Iran.

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.