US inflation jumps to 3.8% as Iran war drives energy costs higher

Data released by the Bureau of Labor Statistics showed the Consumer Price Index climbed to an annual 3.8% in May, up from 3.5% in April. Economists had penciled in 3.6%; the overshoot was driven primarily by the ongoing Iran conflict feeding through to oil and refined product prices.

Energy line items rose 7.4% month-on-month, led by gasoline, while food prices added 0.6% on continuing supply disruptions. Core inflation, which strips out food and energy, came in softer at 3.1%, suggesting price pressure is concentrated in energy rather than broad-based.

Short-dated US Treasury yields ticked higher after the release, and futures markets pared bets on a September Federal Reserve rate cut. A White House statement from the Treasury Secretary called the energy spike "transitory," but market participants remain skeptical given the uncertain trajectory of the Gulf conflict.