CEA Chair (Acting) Pierre Yared (NYT):

… consumer prices would “go back down” once the war ended. That, he added, would relax pressure on families, who would see wages continue to grow “following the tailwinds of the economy.”

“Consumers are continuing to spend, and they do seem to be looking through the shock,” Mr. Yared said. “It looks to us like consumers understand the situation is temporary.”

Well, if we define when “the war ended” as when the Strait of Hormuz is re-opened, then it might be a while.

Source: Kalshi.com, accessed 5/19/2026 4pm CT.

Odds for a reopening by September 1st is a coin-flip.

But suppose we did see a clear war’s end. Suppose further prices would revert within a year to the pre-War Brent price of $70, with 70% of gap between April price ($117) and $70 eliminated within 3 months (this is proportional to the estimated flow resumption, as reported by Goldman Sachs). Then we would see the following evolution of headline CPI.

Figure 1: Oil price – Brent (black, left hand side), Brent futures as of 5/19 6pm ET (chartreuse); and CPI (blue), and simulated CPI (light blue). Oil price for May through March 2027 are scenario projection assuming constant April price through August, and reopening in September; price gap decays 70% per quarter. Projection period shaded light blue. Source: EIA, BLS via FRED, NYMEX via barchart, and author’s calculations.

The CPI projection uses log CPI on log core CPI and log oil price, 2022M01-2026M04 sample.  Core CPI assumed to increase at 2025M05-26M04 rate.

Under these assumptions, the CPI level barely budges downward. The rate of inflation clearly drops, but disinflation is clearly different than deflation.

Of course, should the oil price drop faster than projected, one could get a short term decrease in the price level. However, this runs counter to the view that even when the Strait reopens, flow will remain below 100% of pre-War level given the destruction of facilities.