US inflation rose to 3.3 per cent in March, the highest since May 2024, fuelled by a surge in petrol prices as the impact of the Iran war ricocheted across the world’s biggest economy.
Friday’s consumer price index figure was up from a year-on-year reading of 2.4 per cent in February, but the increase was slightly less than economists had predicted. Analysts polled by Bloomberg had forecast a rise to 3.4 per cent. Consumer prices jumped 0.9 per cent in March from February levels.
The report from the Bureau of Labor Statistics provides the first broad official snapshot of how the war has affected prices for Americans since it erupted at the end of February.
The jump was led by spiralling prices at the pump, which rose by 21.2 per cent compared with the previous month, according to BLS data – the biggest monthly increase since at least 1967.
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“The conflict is putting a lot of pressure on primarily gasoline prices, currently,” said Mike Reid at RBC. “And if you’re spending more on gasoline, you’re going to have to cut back elsewhere.”
The figures lay bare the domestic political risks the conflict poses to Donald Trump just over six months before the midterm elections. The US president’s approval ratings have dropped steeply in his second term.
Futures contracts tracking Wall Street’s blue-chip S&P 500 and the tech-heavy Nasdaq 100 rose 0.2 per cent and 0.3 per cent respectively ahead of the opening bell.
Rate-sensitive two-year Treasury yields slipped 0.02 percentage points to 3.75 per cent. Yields move inversely to prices. The 10-year Treasury yield was unchanged at 4.28 per cent.
Core inflation, stripping out volatile food and energy prices, rose slightly less than expected to 2.6 per cent from 2.5 per cent the previous month, suggesting the impact of higher energy prices has yet to fully pass through to other areas of the economy.
But analysts warned of increases in prices in other sectors in the coming months as the fuel price surge spills over into other areas such as transport and agriculture.
“So far, the shock has had little impact on non-energy prices. However, this is likely to change soon,” said Bernd Weidensteiner at Commerzbank.
US crude prices jumped from about $70 a barrel when the conflict began to more than $110 a barrel in recent weeks as Iran in effect shut off the Strait of Hormuz, through which a fifth of global oil supplies normally flow. US petrol prices have surged past $4 a gallon.
Oil prices receded slightly this week as a fragile ceasefire took effect between the US and Iran, but traffic through the strait remains limited. IMF managing director Kristalina Georgieva warned there would be “no neat and clean return to the status quo” even if the truce holds.
Policymakers have rushed to respond. Minutes released on Wednesday showed Federal Reserve officials debated whether a prolonged conflict would warrant interest hikes or cuts as they grappled with its impact on prices and the jobs market.
Steven Blitz, chief US economist at GlobalData TS Lombard, said that the war meant the Fed was caught in a situation in which it “can’t go out now and cut. They don’t know the permanence of this [fuel] jump”.
“Whatever happens with the ceasefire, there will be a risk premium in energy prices that did not exist before the war,” he added. – Copyright The Financial Times Limited 2026
