US Consumer Inflation Hits Three-Year High Fueled by Iran War

Consumer inflation in the United States hit a three-year high in April, government data showed Tuesday, with the economic fallout of the Iran war rippling through the world's largest economy.

The consumer price index (CPI) rose 3.8% year-on-year, up from March's 3.3% figure, the U.S. Bureau of Labor Statistics (BLS) said.

The U.S.-Israel war on Iran has engulfed the Middle East in violence, with Iranian retaliatory action targeting Washington's regional allies and virtually blocking the Strait of Hormuz.

Roughly a fifth of the world's oil and natural gas passes through the waterway under normal circumstances, and the blockade has sent worldwide energy prices surging.

In April, the U.S. price index for energy rose 17.9% compared to a year ago, BLS data showed, by far the largest price jump for any category.

Food prices were up 3.2% in April over last year, the data showed, with groceries also rising at their highest rate since 2023.

Core consumer price index (CPI) inflation, which excludes volatile food and energy prices, came in at 2.8% in April, up from 2.6% the month before.

'Shock at the pump'

U.S. consumers have been battered by years of higher-than-expected inflation, with policymakers struggling to achieve price stability more than five years after the pandemic began.

U.S. President Donald Trump has made bringing inflation down a key promise since taking office, and stubbornly high inflation will be a major issue for his Republican Party at the midterm elections in November.

High fuel prices will be a core concern for voters. The average price of a gallon of regular gasoline has risen 51% since the start of the war, according to the AAA motor club.

Bernard Yaros, lead U.S. economist at Oxford Economics, warned that high wholesale gasoline prices suggested that pump prices would again lift headline inflation next month.

"Consumers aren't only facing sticker shock at the pump, but also with their utility bills, as electricity prices rose sharply last month," he said.

On Tuesday, Democratic Senator Elizabeth Warren slammed Trump over the latest inflation figures.

"Donald Trump promised to lower costs 'on day one.' Instead, he keeps raising them. First, his chaotic tariffs drove prices higher. Now, his war with Iran is pushing them up even more," she said in a statement.

The U.S. Federal Reserve has a long-term 2% target for inflation, and several policymakers at the central bank have indicated the possible need for interest rate hikes to address rising prices.

"Given that inflation is heading in the wrong direction and the labor market is holding up, it's very unlikely that the Fed will be able to lower interest rates any time soon," said Chris Zaccarelli of Northlight Asset Management.

He added that investors may begin to price in rate hikes for next year.

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