US inflation soared in March amid the US-Israel war with Iran, with prices up 0.9% compared to last month and 3.3% over the year, according to new data released Friday.<\/p>\n
The spike in the consumer price index (CPI), which measures the price of a basket of goods and services, is the largest in nearly two years and the first official measure of how the conflict has impacted US consumer prices, particularly as Iran blocked the strait of Hormuz, where a fifth of the world\u2019s oil and gas would typically pass through.<\/p>\n
The index for energy rose 10.9% in March, led by a 21.2% increase in the index for gasoline which accounted for nearly three quarters of the monthly all items increase. Airfares rose 2.7% in March and were 14.9% higher than a year earlier.<\/p>\n
Core inflation \u2013 which strips out volatile food and energy prices \u2013 rose at a more modest 0.2% over the month and was 2.6% higher over the year.<\/p>\n
The annualized inflation rate has not pushed past 3% since summer 2024, when inflation was finally cooling after reaching a generational high of 9.1% in June 2022.<\/p>\n
A line chart showing latest inflation figures<\/a><\/p>\n The war on Iran has driven the American economy into deeper uncertainty, adding to a precariousness that first came with Donald Trump\u2019s tariffs last year. Inflation<\/a> reached a four-year low last April, when price increases dropped to 2.3%. It rose to 3% by September, before coming back down to 2.4% in January and February.<\/p>\n Oil prices dropped<\/a> after Trump announced a two-week ceasefire with Iran, which agreed to reopen the strait during the ceasefire period, but oil prices still remain high. Even after the agreement was announced, US crude oil was still priced 10% higher than before the conflict and nearly 30% higher since the start of the year.<\/p>\n Recent data shows prices are also impacting producers. Gross domestic product (GDP), which measures all final goods produced in the US, for the last quarter of 2025 was revised down<\/a> on Thursday from an initial 1.4% to 0.5%. And the prices index in the Institute for Supply Management\u2019s survey of managers saw its largest one-month increase in 13 years, rising<\/a> from 63 in February to 70.7 in March.<\/p>\n Though the conflict has impacted prices, the labor market appeared resilient<\/a>: Employers added 178,000 jobs in March while the unemployment rate fell 4.3%.<\/p>\n Strength in the labor market, combined with rising prices, puts officials at the US Federal Reserve<\/a> in a tricky situation as they consider how to adjust interest rates amid the conflict. Raising interest rates could help inflation at the risk of destabilizing the labor market and increasing unemployment.<\/p>\n <\/p>\n