Abstract
Between 28 February and 31 March 2026, the closure of the Strait of Hormuz raised Brent crude from approximately $72 to $118 per barrel and the European and Asian gas benchmarks by roughly 70 percent. We examine a consequence that the energy-shock and public-debt literatures have rarely studied together: partially unanticipated, supply-driven inflation erodes the real value of nominal sovereign liabilities. Using data through 15 August 2026, we decompose the 1.73 percentage-point acceleration in United States headline CPI between February and its May peak: energy contributed 1.44 points (83 percent) and core effects 0.28 points, most of which had reversed by July. We then replace single-figure erosion arithmetic with a maturity-structured accounting model of the Treasury debt stock: under the realized inflation path, first-year erosion is $241 billion—$204 billion excluding Federal Reserve holdings—roughly 40 percent below the $400 billion upper bound computed on gross debt. Finally, we specify falsifiable criteria under which the observed tolerance of above-target inflation would constitute the initial phase of a financial-repression regime; at the cutoff, at most one of six criteria is partially met, and market-implied expectations remain anchored at approximately 2.3 percent. The erosion channel is real but, on present evidence, transitory.