Inflation in the United States continued to heat up in May, as the war in Iran led to a further increase in energy prices. The all-items Consumer Price Index rose 0.5 percent from April to May, with energy prices accounting for more than 60 percent of the overall increase. Headline inflation, i.e. the year-over-year change in the all-items index, climbed to 4.2 percent, the highest level in more than three years, as the energy price index was up 23.5 percent compared to May 2025. Core inflation, which excludes food and energy prices, also ticked up slightly to 2.9 percent, reflecting increases in prices of shelter and medical care services, among others.
According to the Bureau of Labor Statistics, gasoline prices climbed 7.0 percent in May compared to the previous month, building on a 21.2-percent jump in March and a 5.4-percent increase in April. According to the U.S. Energy Information Administration, gasoline prices have eased for the past two weeks, however, with the national average price dropping from $4.475 per gallon of regular gasoline on May 25 to $4.146 on June 8. With the U.S. and Iran having agreed on a preliminary deal to re-open the Strait of Hormuz, gas prices could come down further in the coming weeks, which would ease inflation pressures significantly.
