Cooling energy prices after the partial reopening of the Strait of Hormuz have eased inflation expectations ahead of the Bureau of Labor Statistics' June CPI report on July 14.
Kalshi traders are pricing in a 28% chance that headline inflation will rise above 4.2% in 2026, signaling that market participants increasingly see U.S. inflation as having peaked at May's annual Consumer Price Index reading. The shift follows a retreat in energy prices after the partial reopening of the Strait of Hormuz, which helped reverse some of the earlier oil and gas spike tied to the U.S.-Iran war in late February. Average national gasoline prices stood at $3.84 on Wednesday, according to AAA, down from more than $4.50 at their peak, while U.S. crude oil prices have fallen below $70 per barrel for the first time since the war began. Energy prices accounted for 60% of CPI's month-over-month increase in May, making the pullback a key reason inflation forecasts have eased. Traders on Kalshi, a prediction market platform where contracts are settled using Bureau of Labor Statistics data, now also expect June CPI to show prices falling 0.2% from May, in line with Wall Street consensus estimates. The next CPI report is due from the BLS (U.S. inflation statistics agency) on July 14.