The Energy Tax Nobody Voted For
The May CPI report confirmed what anyone filling up their gas tank already knew: the Iran war has come home. At 4.2% annual inflation — the highest since April 2023 — we're watching a geopolitical conflict translate directly into household budgets. Gasoline up 40.5%. Fuel oil up 58.9%. The Bureau of Labor Statistics notes that energy alone accounted for over 60% of the monthly CPI increase.
This is not a monetary phenomenon anymore. This is a supply shock with a specific cause: the Strait of Hormuz closure. And that distinction matters enormously for what comes next.
The Fed's Impossible Position
Here's what strikes me about the current situation: the Federal Reserve is being asked to fight a war-driven supply shock with demand-side tools. It's like trying to put out a kitchen fire with a hairdryer.
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