Trump Tariffs and Hormuz Closure Drive US Inflation
President Donald Trump's tariffs and the closure of the Strait of Hormuz have pushed US inflation to 3.7%, prompting Federal Reserve interest rate hikes.
Global geopolitical instability and trade policies have intensified inflation risks, pushing U.S. inflation to 3.7% in September 2026. The economic pressure stems from a combination of a war with Iran, a reignited conflict between Saudi Arabia and Yemen, and the closure of the Strait of Hormuz, which triggered a global energy crisis.
Donald Trump further contributed to these price pressures by announcing Liberation Day tariffs. Research from the Global Linkages Lab indicates these tariffs caused a slow buildup of costs through global production networks, leaving U.S. price levels 0.3% above the pre-2025 trend since January 2025. The lab's TiRADE dataset also suggests that threatened tariffs, even those not formally imposed, heavily influence market volatility and risky asset prices.
In response to the energy crisis and persistent inflation, the Federal Reserve raised interest rates in September 2026 for the first time since 2023. Federal Reserve officials, including Chair Kevin Warsh and Governor Christopher Waller, identified energy prices, tariffs, and demand from the AI buildout as primary drivers of inflation. The resulting economic instability has led to elevated U.S. Treasury yields and downside volatility for the S&P 500.
