world-economy

U.S. Inflation Hits 4% as Geopolitical Tensions Drive Energy Costs Higher

Inflation surged to 4% in May, the highest rate in more than three years. The spike came as gasoline prices rose following the U.S. war with Iran. Energy costs accounted for more than 60% of the monthly consumer price increase, with pump prices jumping more than a dollar per gallon since hostilities began. The Strait of Hormuz disruptions have constrained shipping traffic along a major global oil corridor. Airline fares climbed 27% year-over-year amid elevated fuel expenses. Wage growth lagged inflation, rising only 3.4% annually, eroding worker purchasing power. Core inflation, excluding volatile food and energy, stood at 2.9% for the 12-month period. While gasoline prices have eased slightly in recent days on settlement hopes, pumps remain roughly $1.17 above pre-war levels. The stubborn inflation outlook diminishes prospects for Federal Reserve rate cuts.