THE PRICE OF WAR WAR INFLATION

THE INFLATION THAT HAS NOT FULLY ARRIVED YET

FACT CPI headline YoY stayed at 3.4% while monthly inflation accelerated to 0.4%. Core YoY eased from 2.5% to 2.4%, but core MoM accelerated from 0.2% to 0.3%.

JAYU INTERPRETATION A stable YoY rate does not mean prices stopped rising. Base effects and component weights can offset a stronger monthly print. Energy can hit producer and transportation costs before the full consumer pass-through appears.

ORION SCENARIO If oil/freight remain elevated for several weeks, PPI and margins become a more important forward risk for later CPI/PCE releases. The lag is variable and not guaranteed.

Cost transmission is a process, not an instant equation.

BLS, 10 Sep 2026. Final-demand energy +4.2% MoM; diesel +24.1%.
Reuters, 11 Sep 2026; BLS scheduled release 08:30 ET. Core MoM exceeded the 0.2% consensus.

EIA estimates only 4.9 million b/d of crude and petroleum liquids transited Hormuz in 2Q26, down from 21.6 million b/d in 4Q25 before the conflict. Bab el-Mandeb flows were 8.1 million b/d in 2Q26. EIA also notes that bypass routes are more expensive, slower and capacity-constrained.

“Oil does not need to disappear. It only needs to become more expensive to move.”

MILITARY / GEOPOLITICAL WAR

The current regime combines a military/geopolitical front with a trade/economic front. Reuters documents the prolonged U.S.-Iran campaign and disruptions around Hormuz/Bab el-Mandeb. Separately, the White House has announced new restrictions on certain Canadian products, with import exclusions scheduled for September 29 and existing 50% duties remaining for covered goods before then. These are different mechanisms, but both can influence prices, margins and risk premia.

Qualitative Jayu label: oil above $100, disrupted routes and active military risk.

TRADE / ECONOMIC WAR

Canada is currently a documented live trade front; BRICS finance chiefs also criticized unilateral trade and financial measures. Jayu does not generalize this into a single coordinated “global trade war” beyond verified actions.

RAISE RATES

Addresses persistent inflation and expectations, but raises borrowing costs, duration pressure and recession/financial-stress risk. Oil-driven supply inflation is especially awkward because higher rates do not create barrels of crude.

HOLD

Avoids adding immediate rate stress, but risks allowing inflation expectations to become less anchored if energy and core inflation remain firm. The next meeting is Sep 15–16.

XAUUSD · GEOPOLITICAL SAFE HAVEN VS REAL YIELDS / USD

Gold rallied more than 1% on Friday despite stronger Fed hike pricing: exactly the collision Jayu tracks. Safe-haven/dip demand can support the metal while high real yields and a firm dollar cap upside.

NASDAQ · INFLATION → FED → YIELDS → DISCOUNT RATE → VALUATION

Nasdaq can rally on earnings/liquidity even with high yields, but sustained 10Y pressure raises the discount rate applied to long-duration cash flows. The CPI reaction showed both channels can coexist.