The joint U.S.-Israel attack on Iran could drive up gas prices and broad-based inflation around the world, according to several reports.
Any significant price increases, however, depend on how the conflict impacts the supply of oil from the region and how long it lasts. Oil prices rose sharply on Monday, following previous increases in response to the recent U.S. military build-up around Iran.
The Brent Crude Oil index was up about 8% to start the week, to a little over $78 a barrel, according to data from Trading Economics. That compared to an average price of $69 per barrel in 2025.
The price of oil can be a key driver of inflation because it is the foundation for much of the economy. The oil-price increase was blamed for stock market declines on Monday, as the Dow Jones Industrial Average, the S&P 500 and the NASDAQ indices were all down in early trading.
“In a prolonged period of uncertainty, increases in oil prices could generate a global inflationary scare,” said Adam Hetts, global head of multi-asset at Janus Henderson, in a report on CNBC.
Potential insulation from oil-price impact
The U.S. could be somewhat insulated from rising oil prices, however, because of its shale oil supplies and strategic petroleum reserve, according to a report in The Guardian. The report added that rising oil prices could also dissuade the Federal Reserve from lowering interest rates in the near term. Higher rates are seen as helping dampen consumer demand and thus constraining inflation.
Some analysts have also cited a global oil surplus as being likely to help minimize increases in oil prices. The U.S. Energy Information Administration earlier last month predicted that a global glut in oil supply would help drive prices down to an average of $58 per barrel this year and $53 per barrel in 2027.
The latest conflict, which escalated into a full-blown war over the weekend, comes after a Bureau of Labor Statistics report last week indicating that core producer prices were up 0.8% in January, higher than the 0.2% that analysts expected and the biggest increase in several months. The Producer Price Index, which measures the prices that wholesalers pay producers, was up 3.6% year over year, compared with forecasts of about 2.6%.
The PPI for final demand food, however, was down 1.5% in January, reflecting price declines for eggs and some fruits and melons, according to the BLS report.
Meanwhile, tariffs are also expected to continue to have an impact on food prices this year as suppliers held off on raising prices during the holiday season, according to some reports.
The Consumer Price Index, which measures the prices consumers pay at the shelf, was up 2.4% in January on a year-over-year basis for both food at home and for the overall index.
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