The Point, 06.27.26: There's a new kind of inflation to worry about

Energy prices are dropping, but there's a surprising jump in computing costs that's likely to last for a while.

You don’t need to follow financial news every day to keep up with markets and the economy. You just need a sharp weekly summary of what really matters. Here’s The Point:

A stock market tear started at the beginning of April, when the Iran war was still hot and oil was well over $100 per barrel. For two months, the artificial-intelligence boom seemed so compelling that traders put aside concerns about a war and a global energy crisis, bidding stocks to new record highs.

Now, oil prices have tumbled to around $72, nearly back to pre-war levels. There are occasional ruptures in the Iran war ceasefire, but in general it is holding and oil tankers are once again plying the Strait of Hormuz. Yet stocks are in a June swoon and investors are worried about interest rate hikes. The euphoria of the late-war phase has morphed into anxiety.

What gives?

Just a few weeks ago, investors thought the end of the Iran war would bring energy prices down rapidly and alleviate concerns about inflation, which has jumped from 2.4% before the war to 4.2% now. That has partly happened. Assuming there’s no major resumption of hostilities and the oil keeps flowing, energy prices should be back to relatively low pre-war levels in a few months.

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But a new inflation gremlin has emerged. The AI boom has generated huge demand for memory chips, crucial to building data centers in addition to all the computing equipment everybody uses. Structural shortfalls have doubled the cost of these components, with no easy fix in sight. We’ve built a new chart to illustrate the trend: