Iran War Could Add 1.5–2 Percentage Points to Inflation Cumulatively in 2026–27

The Iran war’s energy shock could add an estimated 1.5–2 percentage points to cumulative inflation over 2026–27, based on evidence from the United States, United Kingdom and euro area. The calculation combines evidence from the United States, United Kingdom and euro area, using information available through May. It does not give a separate U.S. estimate, so the 1.5–2-point figure should not be read as the U.S. inflation rate for either year or a forecast of overall price growth. It measures the war shock’s cumulative contribution across 2026 and 2027. Gradual adjustments in sticky prices — prices that take time to change — account for an estimated 1.2–1.6 percentage points. Higher inflation expectations are estimated to add 0.3–0.4 points in 2027.

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