LDN Business - US Gas Prices

Falling gas prices likely cut inflation last month but renewal of Iran war could undo progress

[July 14, 2026] By CHRISTOPHER RUGABER

WASHINGTON (AP) — Inflation likely cooled last month as gas prices declined, providing consumers with some welcome relief even as renewed combat with Iran has sent oil prices climbing again.

The government's latest inflation report, to be released Tuesday, is forecast to show that consumer prices dropped 0.2% in June, according to a survey of economists by data provider FactSet. It would be the first monthly decline in nearly four years. Compared with a year ago, prices probably rose 3.9%, down from a 4.2% annual rate in May.

Gas prices have fallen a bit more in July, suggesting inflation could dip again in next month's report. Still, the better numbers aren't likely to unwind concerns about affordability that have become a political liability for the Trump administration as the midterm elections near. Inflation is still higher than before the Iran war, when it was just 2.4%.

And the situation in the Middle East continues to change hour to hour. On Monday, the price for a barrel of Brent crude oil, the international standard, climbed 9.6% to $83.30 after the United States and Iran each said the Strait of Hormuz is under its control.

Gas price spikes have also raised air fares. And by pushing up diesel prices, they have lifted shipping costs for groceries and other goods.

Yet analysts will be looking at more than gas prices. World Cup matches in 11 U.S. cities likely boosted hotel prices, economists forecast. New and used car prices are expected to have fallen. But prices for many services — restaurant meals, entertainment, healthcare — are still rising more quickly than they did before the pandemic.

Excluding the volatile food and energy categories, core prices are forecast to have risen 0.2% in July from the previous month, and 2.8% from a year earlier, according to FactSet. Monthly increases at that level for the rest of the year would bring core prices — which the Fed pays close attention to — nearer to target.

A slowdown in inflation could take some pressure off the Federal Reserve to raise its key rate, which it typically does to cool spending and price increases. Chair Kevin Warsh, who took over May 22, has underscored that the Fed is tightly focused on getting inflation back to its target of 2%, though he has declined to signal what the Fed's next steps will be.

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Other Fed officials, however, have warned that inflation has been above their target for more than five years, and unless there are clear signs it is declining, a rate hike might be needed. John Williams, president of the Federal Reserve Bank of New York, said last week that core inflation increasing at 0.2% a month or less for the rest of this year would be consistent with falling inflation.

Many of those officials have said massive investments in the buildout of artificial intelligence infrastructure could also worsen inflation by pushing up prices for memory chips and other semiconductors, as well as electricity. As a result, companies like Apple, Microsoft, and Dell have announced price increases for laptops, tablets, and video game consoles.

On Monday, Fed governor Christopher Waller said he was worried about core inflation, which he noted had risen from 3% last December to 3.4% in May, according to the Fed's preferred measure, which uses data from the consumer price index. He pointed out that the cost of more than two-thirds of services have risen by 3% or more compared with a year ago.

Waller had favored cutting rates early this year, but is now warning a hike could be needed.

“If we get another hot reading on core inflation this week, then the (Fed) will need to consider tightening monetary policy in the near term,” Waller said in a speech in New York.

Gas prices have fallen nearly 20% from their peak in late May but have rebounded in the past week, likely in response to renewed fighting in the Middle East. Gas prices averaged $3.87 a gallon nationwide Monday, up 7 cents from a week earlier. They averaged $4.09 a month ago, according to AAA.

Other signs of where prices are headed are mixed. The Federal Reserve Bank of New York said last week that a survey found that nearly half the companies in its region that have paid tariffs still plan to lift their prices further.

Separately, Walmart last week said it was rolling back prices on thousands of items, including ground beef, potato chips, toys, and clothes. President Donald Trump praised the move on social media and sought to take credit for the reduction, though the company did not mention Trump in its announcement.

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