The Obsidian
Business

An Iran Premium at the Pump, and on the Inflation Print

April CPI rose 3.8%, eroding wage gains for the first time in three years. Energy is doing most of the work, and energy is being priced off a war.

The Obsidian Desk

American consumers got their first negative real wage reading in three years in April, according to data released Tuesday. The proximate cause is petrol; the structural cause is geopolitics.

Crude has traded at an elevated risk premium since the opening weeks of the US-Israel campaign against Iran. Refined fuel costs have followed. Each leg higher in oil has translated, with a short lag, into a higher headline CPI.

If the conflict de-escalates, much of the premium unwinds. If it does not, the Fed's calculus tilts further toward inflation discipline at exactly the moment the political system is least able to absorb it.

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