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The conflict involving Iran is expected to increase inflation due to its impact on energy costs.
Since the start of the Iran conflict, the price of oil has risen from $66 per barrel to $98 per barrel.
PIMCO predicts that U.S. headline inflation will accelerate to 4% in the next several months.
PIMCO's core forecast suggests that if energy prices fall, headline inflation could drop below the Federal Reserve's 2% target in late 2026 or early 2027.
The cost of new natural gas turbines has nearly tripled in the last three to four years.
The cost of new natural gas generation capacity has increased from approximately $1,000 per kilowatt four years ago to over $2,500 per kilowatt today.
The recent inflation report's headline number was primarily driven by a surge in energy prices.
Real labor income in the U.S. is currently growing at a rate of approximately 1%.
The cost of new nuclear power generation is estimated to be well over $10,000 per kilowatt.
Since the start of the Iran conflict, the 10-year Treasury yield has risen from 4.0% to 4.3%.
PIMCO has lowered its GDP forecasts due to the anticipated impact of higher energy prices on economic growth.
PIMCO has delayed its forecast for when the Federal Reserve will begin cutting interest rates, now expecting a prolonged pause.