How inflationary is the oil price spike?

Inflation is likely to stay sticky over the next year, with energy prices and the U.S.-Iran conflict driving the near-term path. In the base case, CPI rises into midyear before easing later as oil prices cool, tariffs fade, and shelter inflation continues to soften.

Even so, all three scenarios point to inflation staying above the Fed’s 2% target for an extended period. A renewed escalation could push inflation above 5%, while a faster diplomatic resolution would still leave price growth elevated by historical standards.

For investors, that means rate cuts are unlikely in the near term and volatility may persist across rates and energy-sensitive assets. The main opportunity lies in watching for signs that oil markets are stabilizing and disinflation in housing is broadening.