Reports of a potential ceasefire between the United States and Iran have slightly cooled surging oil prices, which recently touched $115 per barrel. Analysis from the Kobeissi Letter indicates sustained high oil prices could push US inflation to 3.7%, its highest level since September 2023, with Americans having spent an extra $240 million daily on fuel since the conflict began.
The prolonged closure of the Strait of Hormuz amid ongoing US-Iran hostilities has led to violent oil price fluctuations, fueling inflation fears. Data shows crude oil was trading at $111 at press time after reports surfaced of discussions for a 45-day ceasefire between the nations.
Higher oil prices above $115 may trigger significant inflation concerns, according to new findings. The Kobeissi Letter outlined models indicating that if current levels are sustained for another seven weeks, US CPI inflation will rise to approximately 3.7%.
“This would put US inflation at its highest level since September 2023,” the analysis stated. Since the war began on February 28th, Americans have spent an additional $240 million per day on fuel costs, totaling over $8.6 billion in increased spending over 36 days.
The analysis firm’s new base case is 3.0% CPI inflation, noting it is only rising as the war’s timeline is extended. The situation remains a developing global economic hazard as market participants watch for a permanent resolution to the conflict.
