First Inflation Wave After US–Iran War: Oil Shock Drives CPI and Global Markets
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Key Points:
- CPI surged sharply after the US–Iran war as rising oil prices triggered the first wave of a broader inflation cycle.
- The inflation shock is spreading in waves from fuel to transport, food, and services, increasing pressure on consumers and raising recession risks.
- Markets are reacting with rising yields, weaker equities, a softer dollar, and mixed outlooks for gold and silver amid inflation and growth uncertainty.
The real data now reflect the first wave of inflation following the US-Iran war, with CPI rising 0.865% in March, and annual inflation rising to 3.3% primarily due to a steep increase in gasoline prices. I think that this action is the initial phase of a broader inflationary cycle as increased oil prices start to permeate into transport, food and manufacturing industries. The soaring prices of gasoline and diesel have already impacted consumers and are beginning to affect inflation expectations.