Tracking Inflation Risks from the Middle East Conflict

Research evidence excerpt

Tracking Inflation Risks from the Middle East Conflict

Economics Research

12 July 2026 | 8:01PM EDT

US ECONOMICS ANALYST

n The US and Iran each carried out new attacks over the last week. A serious David Mericle

+1(212)357-2619 |

re-escalation of the conflict would threaten to revive the key upside risk to david.mericle@gs.com

Goldman Sachs & Co. LLC

inflation and raise the odds of rate hikes.

Pierfrancesco Mei

+1(212)902-8809 |

n Oil prices have risen only moderately so far during the latest escalation and pierfrancesco.mei@gs.com

remain roughly 30% below the levels reached in late April and early May.

Gasoline prices have declined 15%, jet fuel prices have fallen 35%, prices of other

Persian Gulf exports are down sharply from their wartime peaks, and while

shipping costs have kept rising, the increase so far should have only a modest

impact on consumer prices. Oil flows from Gulf countries dipped last week but

remain above their lows, and total oil inventories have not been replenished but

are not strikingly low.

n A key question for upcoming inflation reports and for the Fed is how much

impact further disruptions caused by the conflict are likely to have on consumer

prices. We approach this question using two statistical tools. The first is our

model of passthrough from commodity prices to consumer prices, which

suggests that the monthly impact peaked in Q2 and should decline noticeably in

Q3 and further in Q4, assuming there is no re-escalation of the conflict that

raises energy prices again. The second tool uses measures of shortages and

supply chain pressures to estimate the broader effects of conflict-related

disruptions beyond energy and also suggests that, barring further escalation,

these effects should decline substantially in Q3 and Q4.