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Inflation dropped more than expected in June as gas prices eased in response to negotiations between U.S. and Iran over the Middle East conflict.
Prices rose 3.5% in June compared to a year earlier, marking a retreat from a year-over-year inflation rate of 4.2% in the prior month, federal government data released on Tuesday morning showed.
The reading for June marks the lowest inflation since March, though the pace of price increases remains more than a percentage point higher than its pre-war level.
Last month, oil prices fell to their lowest level since before the late February outbreak of the Iran war. That drop came after a preliminary agreement included provisions aimed at resolving a global crude shortage.
A spike in oil prices over recent days amid a resumption of fighting, however, threatens to push gas prices higher, erasing some of the relief delivered last month.
A shopper browses near ‘Sale’ signs in the meats section of a grocery store on July 7, 2026 in Pasadena, California.
Mario Tama/Getty Images
Brent crude futures, the benchmark index for worldwide trading, rose to $86.90 a barrel on Tuesday. That figure stood roughly even with its level a month earlier, though it remained more than 20% higher than its pre-war level.
The inflation report on Tuesday offered some additional bright spots outside of energy prices.
Core inflation — a measure of price increases that strips out volatile food and energy prices — clocked at 2.6% over the year ending in June. That reading indicated a slight decline from the previous month, suggesting the cooldown had extended beyond gasoline.
