Will the war in Iran unleash a new inflation threat?
February inflation data released this week shows that the cooling trend is continuing. The Consumer Price Index increased .3% last month, and 2.4% year-over-year-year. That matched economists’ expectations. It was also little changed when compared to January. Fastest 4 031126
Core CPI, which excluded volatile energy and food prices, rose just .2% month to month, and 2.5% over the past 12 months. It’s been 5 years since inflation took off, threatening to reach double digit annual increases. While the cumulative effect of that is still being felt by workers whose wages didn’t keep up, the inflation beast is being tamed.
Oil Prices Surge as Iran Conflict Threatens Global Supply
However it may be a huge inflection point. As we talked about on last week’s Fastest 4 segment, the war in Iran has put a perceived threat on global oil supply. At the time of this recording, oil prices have jumped nearly 34% in the past month, most of that occurring since the war began. Prices peaked at $115 per barrel in early March before sliding back to around $86 as we record this.
Gas Prices Jump as Americans Feel the Impact at the Pump
That has created real price pressure at the pump. You’ve no doubt filled your gas tank enough now to notice the pinch to your cash flow. According to Triple-A, the average gas prices jumped almost 50 cents per gallon in just the past week. The national average is $3.47. Yahoo Finance estimates Americans collectively could be spending $187 million more per day than they did a week ago.
Why Future CPI Reports Could Show Rising Inflation
The good inflation news from February does not cover the period of time since the war in Iran began. We should be prepared to see a spike in CPI next month.
Where oil prices go from here, depends on how long the war in Iran drags on. And, the longer it drags on, other consumer prices could jump as well. A rise in transportation costs will eventually trickle down to businesses, and could be passed on to the consumer. Everything from airline tickets to groceries could see a price shock.
Strategic Oil Reserves Released to Stabilize Energy Markets
All of it could be a blip on the radar, if the war ends. And other oil supply moves could change the game as well.
After the Iran attacks on oil vessels in the Straight of Hormuz, The International Energy Agency announced this week that its 32 member countries would release 400 million barrels of oil from their strategic reserves, the largest ever and the first action of its kind since 2022. Gauging the threat to global oil supply is a speculative game. But, it’s a game we all pay for.
The Financial Strategy That Helps You Handle Price Shocks
Personally, the best way to endure it, is to have ample cash flow margin. The wider the difference between your income and your expenses is, the easier it is to absorb higher costs when necessary, without derailing your savings.
Securities are offered through LPL Financial, Member FINRA/SIPC. GenWealth Financial Advisors is an other business name of Independent Advisor Alliance, LLC. All investment advice is offered through Independent Advisor Alliance, LLC, a registered investment adviser. Independent Advisor Alliance, LLC is a separate entity from LPL Financial.
