Rising oil prices are beginning to echo the 1970s oil crisis, and the pattern of U.S. CPI is also increasingly resembling that of the 1970s. Could it be that fate is at play?

Will inflation rise? It can be said that an uptick in inflation is almost certain. While non-ferrous metals surged throughout 2025, their impact on U.S. CPI and PPI has been limited. This is largely because the U.S. relies heavily on imported manufactured goods, with a small proportion produced domestically, so price increases in raw materials like copper and aluminum have had minimal effect. However, rising crude oil prices tell a different story—after all, the U.S. is a nation on wheels. Estimates indicate that since the beginning of the year, oil price increases have contributed approximately 1.3% to U.S. CPI and about 3.5% to PPI, far exceeding the impact of copper and aluminum price hikes.

What does this estimate imply? It suggests that if oil prices stabilize between $90 and $100 per barrel, U.S. CPI is likely to exceed 3% going forward.

On the other hand, although the trend of rising inflation is clear, its resilience and magnitude remain open to debate. Some signs indicate that this round of U.S. inflation will not simply mirror the 1970s. For example, the position of the real estate cycle is markedly different—in the 1970s, the U.S. was in a population expansion phase, with rental vacancy rates as low as 5%, creating an ideal environment for rental inflation. Currently, the U.S. rental vacancy rate stands at 7.2%, exceeding pre-pandemic levels and showing an upward trend, which naturally exerts downward pressure on rental inflation.

Originally, without considering oil price shocks, U.S. endogenous inflation was trending downward. Official CPI data in recent months have been relatively stable (2.4% in February), indicating that underlying inflationary pressures are indeed easing—this has been the Federal Reserve's primary rationale for interest rate cuts. However, coincidentally, former President Trump's military adventurism has encountered stiff resistance, creating a situation that is difficult to reverse. Soaring oil prices may completely offset the easing cycle...

On one side, there is weak employment data; on the other, inflation driven by high oil prices. The Federal Reserve now faces its most challenging scenario.

To summarize today's insights: 1. Rising oil prices are beginning to echo the 1970s oil crisis, and the pattern of U.S. CPI is also increasingly resembling that of the 1970s—could fate be at play? 2. Will inflation rise? It can be said that an uptick in inflation is almost certain. The impact of crude oil price increases on U.S. CPI far exceeds that of non-ferrous metals. Estimates suggest that if oil prices stabilize between $90 and $100 per barrel, U.S. CPI is likely to exceed 3% going forward. 3. Originally, without considering oil price shocks, U.S. endogenous inflation was trending downward, including rental inflation. However, coincidentally, former President Trump's military adventurism has encountered stiff resistance, creating a situation that is difficult to reverse. The Federal Reserve now faces its most challenging scenario.