The Impact of the 2026 Iran War on U.S. Inflation: A Scenario Analysis

Lutz Kilian, Michael Plante, Alexander Richter and Xiaoqing Zhou
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Lutz Kilian: https://www.dallasfed.org/research/economists/kilian

No 2609, Working Papers from Federal Reserve Bank of Dallas

Abstract: This paper shows how to assess the inflationary impact of the rise in the price of oil caused by the 2026 Iran War. We first generate projections of the quarterly price of oil from a calibrated DSGE model of the global economy under a range of scenarios and then incorporate these projections into a monthly VAR model of the impact of U.S. gasoline price shocks on inflation and inflation expectations. Our analysis speaks to the magnitude and persistence of the impact of higher oil prices on headline and core PCE inflation and on household inflation expectations.

Keywords: geopolitical risk; rare disasters; oil prices; gas prices; inflation; structural VAR (search for similar items in EconPapers)
JEL-codes: C54 E31 E37 Q43 (search for similar items in EconPapers)
Pages: 39
Date: 2026-04-07
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:103008

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DOI: 10.24149/wp2609

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