US economist Peter Schiff has warned that Brent crude’s jump back above $100 a barrel risks wiping out June’s fall in inflation and delivering a sharp rebound in July price data.
Schiff, posting on X, argued that the rapid reversal in oil markets could unwind the relief that cheaper energy delivered in the latest US consumer price index (CPI) report. He highlighted that crude had already risen about 30% in July and moved back above $90 per barrel when he issued his warning.
“Investors celebrated the June CPI, as a 30% fall in the price of oil led to a larger-than-expected decline. But so far in July, the price of oil is already up 30%, back above $90 per barrel,” Schiff wrote.
He calculated that a climb to $100 by the end of the month would represent a 43% increase from oil’s recent low – a threshold Brent crossed only hours later after fresh disruption to Middle East supplies pushed prices higher.
“If the price hits $100 by month-end, that will be a 43% rise. July CPI could be a doozy!” he added.
June inflation fall heavily driven by cheaper energy
Schiff’s comments came in response to a question on X about whether the jump in oil would amount to a short-lived supply shock. He argued instead that June’s improvement in headline inflation owed so much to energy that a stronger rebound in July prices could simply erase that effect, rather than spark a new, separate wave of inflation.
Official figures from the US Bureau of Labor Statistics (BLS) showed headline CPI declined by 0.4% between May and June, a larger drop than the 0.1% fall economists surveyed by Reuters had anticipated. On an annual basis, inflation slowed to 3.5% from 4.2%, also below the consensus forecast of 3.8%.
Energy costs accounted for much of that easing. The BLS reported that the overall energy index slid 5.7% in June, its steepest monthly decline since April 2020, while gasoline prices fell 9.7%. By contrast, core CPI – which strips out food and energy – was flat on the month and stood 2.6% higher than a year earlier.
Despite the monthly decline, the BLS noted that energy prices were still 15.7% above their level a year earlier, with gasoline up 26.7% over the same period. That left US households vulnerable to higher fuel bills again if crude prices stayed elevated through the remainder of July.
Red Sea attacks and Iran tensions jolt oil market
Those concerns intensified as renewed supply risks drove oil sharply higher. Brent crude rose around 7% to $100.71 a barrel on Thursday, its highest price in nearly two months, while US benchmark West Texas Intermediate climbed above $90 for the first time since June.
The move followed a Houthi attack on two Saudi tankers in the Red Sea and a declared blockade on Saudi-linked shipments passing through the Bab el-Mandeb Strait. The route has taken on added importance for Saudi exporters because tanker traffic through the Strait of Hormuz remains heavily constrained.
Reuters reported that Iranian oil exports, which had previously reached as much as 2 million barrels per day, had dropped to almost zero during the current conflict. Analysts at Goldman Sachs told the news agency that Brent could rise above $120 a barrel if the disruptions continue, although they stressed that such an outcome would depend on how long and how severe the supply losses prove to be.
Diplomatic efforts have so far failed to restore normal shipping flows. US Secretary of State Marco Rubio reiterated Washington’s readiness to engage in talks but accused Iran of not demonstrating a serious commitment to a deal. Ongoing US air strikes and Iranian military activity have kept traders alert to the risk of further damage to energy infrastructure and transport corridors.
Fed decision looms without full picture on July prices
The renewed surge in oil has complicated expectations ahead of the Federal Reserve’s policy meeting on 28–29 July. Fed officials have repeatedly described energy costs as a key driver of headline inflation, and several policymakers have cautioned that a single softer CPI print is not enough to confirm a durable downtrend.
After the June figures were released, Fed Governor Christopher Waller said he would need to see “several months” of weaker inflation data before being convinced that price growth was heading back towards the central bank’s 2% target.
As of 23 July, futures markets still leaned towards no change in interest rates at this month’s meeting. Pricing implied a 62.1% probability that the Fed would leave its target range at 3.50%–3.75%, with a 37.9% chance assigned to a 0.25 percentage-point increase, according to data from the CME FedWatch Tool.
That represented a sharp shift from 14 July, when traders, reacting to the softer-than-expected June CPI report, saw only a 10% likelihood of a July rate hike.
The Fed will have to make its decision without seeing the impact of the latest oil rally in official inflation figures. The BLS is due to publish July CPI data on 12 August, after the meeting concludes. Schiff’s warning underlines the risk that resurgent energy costs could hinder efforts to build on June’s progress in cooling price pressures.
