Consumer prices fell in June 0.4 percent, following a renewed, short-lived ceasefire in the Iran war, with 12-month inflation dropping from 4.2 percent to 3.5 percent, according to the U.S. Bureau of Labor Statistics.
That’s good news, with average weekly earnings for private sector workers back up to 3.8 percent the past twelve months.
The decreases were led by falls in the energy prices as gasoline fell 9.7 percent and fuel oil dropped 9.2 percent.
With U.S. strikes in Iran resumed after Iran attacked ships transiting the Strait of Hormuz — that led President Donald Trump to declare the ceasefire with Iran was terminated — a good question is whether the relief for U.S. consumers will be short-lived as oil prices begin climbing upwards again.
After hitting about $69 a barrel on July 1, West Texas Intermediate (WTI) crude oil prices have now recovered to almost $79 as of this writing on July 14 — a 14 percent increase in just two weeks and climbing — as the U.S. has resumed the naval blockade of Iran’s ports.
Describing the current mission to keep the Strait of Hormuz open, on July 14 the President posted on Truth Social, “Oil is flowing like never before, thanks to the awesome Power of the United States Military… Because of them… the Strait of Hormuz is open to ALL Ship traffic except for Iran — and that is because of their lying, violent, malicious leadership, which is taking them down the path of TOTAL DESTRUCTION. We will therefore have a FULL Blockade, but only on Ships coming to and from Iranian ports, or carrying anything have to do with Iranian cargo.”
Trump added, “The days of Iran killing hundreds of thousands of people, including 52,000 protestors, are OVER and, most importantly, IRAN WILL NEVER HAVE A NUCLEAR WEAPON!”
Markets are smart, and prices will tell the tale of how open the freedom of the seas really is. Without the Strait to strangle global oil trade, Iran will effectively be left with very little leverage.
Even if consumer inflation could be restored to prewar levels — looking less likely now — with average weekly earnings about where they were in February, U.S. households might break even on the post-Covid inflation that began in 2021 by about September 2027, according to an Americans for Limited Government Foundation analysis of Bureau of Labor Statistics data.
But a lot of that would depend on inflation continuing to collapse, which in turn appears to depend on the Strait being permanently reopened. A big if.
All along, President Trump has promised that he would conclude the war in Iran, one way or another. In this case, following an extension of the April ceasefire in June — the terms of which included the Strait of Hormuz being open — attacks on ships transiting the Strait has led to reprisal attacks on targets in Iran.
It’s classic carrot and stick diplomacy. Tehran did not want the carrot, so they get the stick.
This comes atop the President calling further negotiations with Iranian leaders a “waste of time”. The memorandum of understanding had called for a 60-day extension of the ceasefire pending final settlement of Iran’s nuclear program.
The President has also stated that Iran can keep talking if it wants, but that the ceasefire is still over, writing on Truth Social on July 10: “The Islamic Republic of Iran has asked us to continue ‘talks.’ We have agreed to do so, but the United States has stated to them, in no uncertain terms, that the Cease Fire is OVER!”
And with hostilities resumed and the utility of peace talks appearing to be almost zero — the President was noting that Iran does not keep its agreements — President Trump appears on finishing the job his way after all. How and when it ends will be at a time of his choosing.
Robert Romano is the Executive Director of Americans for Limited Government Foundation.
