Inflation breakdown for August 2026 in one graph

Inflation remained high in August, and consumers are likely to continue feeling economic pain for months to come as tensions in the Middle East rise and gasoline and other energy costs rise, economists said.

The Consumer Price Index, a measure of inflation, rose an annualized 3.4% in August, unchanged from July, according to data released Friday by the Bureau of Labor Statistics.

“There are a lot of shocks that are going to push inflation up and get it to uncomfortably high levels,” said Mark Zandi, chief economist at Moody’s.

Economists say the Iran war, tariffs and artificial intelligence are among the factors putting upward pressure on consumer prices.

“We continue to hope that this shock will fade into the background,” Zandi said. “But they’re not going away. They’re still bothering us with such huge increases.”

The CPI report comes as yields on U.S. Treasuries have risen to their highest levels in years, raising borrowing costs for consumers seeking certain types of debt, such as mortgages and auto loans.

Some economists said Friday’s relatively high level of inflation meant the Federal Reserve was likely to raise interest rates at next week’s policy meeting to cool the economy and bring U.S. inflation down to its 2% annual target. Inflation has exceeded that target for more than five years.

However, economists said the trajectory of interest rates remained somewhat uncertain.

“As far as the Fed is concerned, this CPI report is very informative,” said Thomas Ryan, North American economist at Capital Economics.

Ryan said inflation risks appear to be “clearly biased to the upside.”

“I’m not really convinced that we’re going to get back to 2% for at least the next six months or any time soon,” Ryan said.

Economists said the Iran war has a lot to do with the current high inflation.

Economists say the war has severely restricted the flow of oil through the key Middle East corridor for energy trade, reducing global energy supplies and raising prices.

“Conflict is a major energy shock for the global economy,” said Joe Seidle, senior market economist at JPMorgan Private Bank.

“If the conflict hadn’t happened this year, I don’t think inflation would have been discussed with much interest,” he said.

Global oil prices soared above $100 a barrel this week for the first time since mid-May as fighting intensified in the Middle East.

Initially, oil inflows were restricted to passing through the Strait of Hormuz, a key choke point for ocean energy trade. The fighting has escalated, threatening supplies through other key trade routes, including the Bab el-Mandeb Strait, which connects the Red Sea and the Gulf of Aden.

The war is on the edge and “continues to get worse, not better,” Seidl said.

Oil supply shocks have increased the prices of gasoline, diesel, jet fuel, and other fuels refined from crude oil.

Gasoline prices rose nearly 4% in August and are up more than 27% from August 2025, according to Friday’s CPI report. Pump prices averaged about $4.30 per gallon on Friday, up from $3.19 a year ago, according to AAA.

Gasoline accounted for more than one-third of the monthly increase in the consumer price index in August, according to the BLS.

But economists said they were more concerned about rising prices for other fuels, such as diesel. That’s because the global economy relies on these fuels for critical functions such as transporting food and other goods to stores.

On Friday, diesel prices reached $6 a gallon, a record high.

Capital Economics’ Ryan said the move would put upward pressure on inflation over the medium term, “as it impacts the costs of transportation, trucking and farm equipment, which ultimately flow through the supply chain and drive up prices on the shelf for food and a wide range of goods.”

Meanwhile, rising jet fuel prices are making airline tickets more expensive for consumers, economists say.

Airfares rose nearly 3% in August and more than 23% from August 2025 onwards, according to CPI data.

Economists say large amounts of fertilizer are also passing through the Strait of Hormuz, threatening to push up global food prices.

Economists said it was unclear how much the energy shock would spread to other parts of the economy. That largely depends on the length of the war, which exceeded six months at the end of August.

Economists say energy is not the only source of upward pressure on inflation.

It is said that enhanced AI is also contributing.

That’s because of the growing demand and scarcity of computer chips used in AI data centers. Economists say manufacturers are using these chips in all kinds of consumer electronics, including laptops, video game consoles and new cars.

For example, in June, apple Citing rising memory and storage costs, the company announced price hikes for MacBooks and iPads. microsoft Shortly after, the company announced that it would be increasing the prices of Xbox game consoles for similar reasons.

“This is starting to impact not only data centers, but also home price increases,” Ryan said.

Tariffs imposed by the Trump administration also “feel like they’re still trickling in” to higher prices on consumer goods, Zandi said.

But Seidl said tariffs no longer appear to be the main driver of inflation.

The Supreme Court struck down central parts of President Trump’s tariff policy in February. It exempted U.S. businesses and consumers from import taxes, but the administration is trying to achieve a similar result by imposing tariffs using other legal tools, economists said.