Consumer prices in the US rose 4.2% year-over-year in May 2026, marking the highest inflation reading since April 2023. The number came in above the prior month’s 3.8% and landed right where markets expected it.
The culprit is familiar: energy. Costs across the energy sector surged 23.5%, accounting for more than 60% of the monthly CPI increase. Gasoline prices alone climbed 40.5% compared to a year ago, while fuel oil prices spiked a staggering 58.9%.
Geopolitics are doing the heavy lifting on energy
The energy price explosion isn’t happening in a vacuum. Ongoing geopolitical tensions in the Middle East, particularly involving Iran, have been squeezing global supply chains and pushing crude oil prices higher for months.
Strip out food and energy and inflation still looks uncomfortable. Core CPI rose to 2.9% year-over-year, its highest level since September 2025. For context, the Fed’s target inflation rate remains 2%. A core reading of 2.9% puts them nearly a full percentage point above where they want to be.
