Gas prices are driving inflation and interest rate shifts in the U.S. U.S. retail gasoline prices surged from around $3 per gallon at the end of February to nearly $4.5 in May. During the same period, overall U.S. CPI jumped from about 2.4% to over 4%, with energy prices directly fueling inflation. When gas prices rise, it’s not just about higher fuel costs. Transportation, aviation, agriculture, delivery services, food, and goods prices all follow suit. This also limits the Fed’s room to cut rates. The longer high gas prices persist, the more inflation spreads to other sectors. From April to May, news of U.S.-Iran diplomatic talks and the potential revival of the "Memorandum of Understanding" briefly pulled gas prices back, but they quickly rebounded. The market only temporarily priced out the risk premium of war and supply disruptions, doubting that a memorandum could truly resolve energy supply issues. In June, gas prices dropped from around $4.5 to $3.8 per gallon, and CPI began to ease. However, the U.S. 10-year Treasury yield continued to climb, now nearing 4.7%. This shows that falling energy prices only address part of the problem. While cheaper gas helps lower CPI in the short term, the U.S. still faces fiscal deficits, Treasury issuance, term premiums, and the Fed’s pressure to maintain high rates long-term. That’s why Treasury yields haven’t followed CPI down. In plain terms, rising gas prices quickly push inflation higher, but falling gas prices don’t mean interest rates will drop immediately. Short-term inflation may improve with lower energy prices, but long-term rates are still tied to U.S. fiscal and debt supply issues. This is the biggest headache for the U.S. market right now. If gas prices rise again, CPI and rate cut expectations will worsen. If gas prices continue to fall, Treasury yields might not drop either. The pressure of high rates on U.S. stock valuations, real estate, and consumer spending is far from over. @Gate Crypto, U.S. stocks, Hong Kong stocks, Korean stocks, gold, CFDs, prediction markets—all in one place for trading.