Bad Inflation Reports Are Often Like Cockroaches

The Bureau of Labor Statistics said the consumer price index jumped 3.3% in March from a year earlier, the most since mid-2024 and driven by soaring energy prices amid the US-Israeli war with Iran. Judging by the muted reaction in markets, investors are assuming that we’re close to the peak of inflation and happy to move on to other worries. Not so fast.

First, reports of this nature — with prices up a staggering 0.9% from the previous month — are rarely one-offs. Modern history suggests that monthly surges in inflation are often the start of something broader. A similar episode in 1950 (the Korean War) was followed by a cluster of other occurrences, as was the case in the 1970s (Arab Oil Embargo, Iranian Revolution) and 2021 (pandemic, Russian invasion of Ukraine). One reason is that wars and other geopolitical shocks themselves rarely happen in isolation. Once they emerge, underlying global tensions tend to stick around and keep impacting the economy.