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- October 13, 202618°
- BIST10012,151-0.94%
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- INTEREST37.00%-1.00
- BITCOIN81,946-2.06%
- October 13, 202618°
Iran War Pushes May Inflation Higher in the US
US inflation is expected to rise for the third consecutive month in May. The war with Iran has driven up energy prices, increasing pressure on consumers.
US inflation for May is expected to have increased for the third consecutive month as the ongoing war with Iran pushes energy prices higher. The consumer price index data to be released on Wednesday will reveal the extent of price pressures.
Economists surveyed by Dow Jones predict annual inflation will rise to 4.2%. This figure is significantly above the 2.4% level seen before the war began and would be the highest since early 2023.
Energy Prices Add to Inflationary Pressure
Analysts say high energy costs continue to exert upward pressure. Lloyd’s Bank analysts note that although energy prices may be less volatile than in the previous two months, they are still likely to support inflation.
Since the war started, oil prices have risen by about 40%. US crude briefly surpassed $115 per barrel in early April.
Although pump prices have recently fallen by 40 cents, drivers are still paying roughly 40% more for fuel compared to pre-war levels. This indicates ongoing strain on consumer budgets.
Strait of Hormuz and Stock Concerns
Company executives and analysts warn that easing prices do not fully reflect another risk area. Energy stocks are being rapidly depleted to replace oil trapped in the Strait of Hormuz, and some observers believe these reserves could reach critically low levels by the end of June.
Exxon Mobil executive Neil Chapman said at last month’s Bernstein investment conference that prices could spike sharply if stocks hit critical lows. This warning keeps the possibility of a new market wave on the table.
Core Inflation and Other Components
Wednesday’s report will closely watch core inflation, which excludes food and energy. Expectations are for the core measure to return near 3%.
Bank of America analysts noted that aside from airline tickets, inflation has not yet strongly impacted core items overall. However, many indicators suggest this transition may soon begin.
Analysts say this scenario raises the risk of a repeat of the price surge seen in 2022, when annual inflation reached 8.9% due to the Covid-19 pandemic and its aftermath.
Companies are increasingly citing rising material costs. The Bank of America team attributes this to both inflation and supply chain disruptions.
Tariffs and Fed Pressure
JPMorgan’s chief US economist Michael Feroli says tariffs have returned to the top of the agenda. President Donald Trump’s plan to impose at least a 10% tax on products from 60 countries has reignited debate.
These tariffs, which are not finalized and include many exceptions, could affect imports from key trade partners such as China, Taiwan, the European Union, Canada, and Mexico. Clothing, white goods, and some household products may be impacted.
Last week’s strong employment data has also heightened price pressure concerns for the Fed. The creation of 172,000 new jobs in May has shifted focus toward inflation in monetary policy decisions.
Market participants expect a rate hike by year-end, with about a 60% chance of an increase by October. Cleveland Fed President Beth Hammack said if recent data continue, monetary policy may need to act to address rising inflation risks.
Hammack also noted that policy might not be tight enough to bring inflation down to the 2% target, highlighting the challenge the Fed faces in balancing its approach going forward.
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