Plunge in gas prices during Iran ceasefire brings relief. Renewed conflict poses fresh threat.

Gas prices might start rising again due to renew hostilities between the U.S. and Iran.

The cost of living fell in June for the first time in six years thanks to plunging gas prices, but the U.S. battle against high inflation is far from over.

The consumer price index slid 0.4% last month to mark the first drop since May 2020, when the coronvirus pandemic was still raging.

Gas prices sank 10% in June to account for the decline.

The yearly rate of inflation also came off a boil, slowing to 3.5% from a three-year high of 4.2% in the prior month.

Gas prices fell further in early July, but the resumption of hostilities between the U.S. and Iran has put a halt to the progress, at least for now. Oil prices have risen sharply this week.

Even if gas is removed from the equation, U.S. inflation is still too high, but the June CPI showed some progress. The so-called core rate that strips out food and energy was flat in the month, coming in below the Wall Street forecast of a 0.2% increase.

The yearly increase in the core rate dropped to 2.6% from 2.9%, but it's still well above the Federal Reserve's 2% target. The core rate is a better predictor of inflation trends in the long run.

Some top Fed officials such as gov. Chris Waller say the Fed might even need to raise borrowing costs unless prices start to slow more rapidly. The June CPI should ease worries about a rate hike in July.

New Fed chief Kevin Warsh has talked tough inflation, but it remains to be seen if his first move as chairman is to support a rate hike. He was nominated by President Trump in large part on hopes that Warsh would reduce borrowing costs to stimulate an economy that doesn't seem to need it.

Warsh is testifying this morning before Congress to lay out his inflation-fighting strategy. He became the Fed chairman in May.

Big picture: The economy is growing and doing well by many measures, but there's several trouble spots. Jobs are hard to find for the young and unemployed, high mortgage rates are depressing home sales and inflation is running rampant again.

The Fed is caught between these two forces, but it will probably have to raise rates if inflation doesn't continue to slow.

Top officials are hoping oil prices remain stable and inflation starts moving back down to their 2% goal by the end of summer.

Market reaction: Stocks were littel changed in premarket trading after investors digested the CPI report with one eye, while keep the other on Warsh's congressional testimony with the other. Bond yields BX:TMUBMUSD10Y fell slightly.

-Jeffry Bartash

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July 14, 2026 08:34 ET (12:34 GMT)

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