Updated on: April 10, 2026 / 8:16 PM EDT / CBS News
A global energy shock tied to the Iran war pushed U.S. inflation sharply higher in March, with the Consumer Price Index rising at a 3.3% annual rate — the highest reading in nearly two years.
By the numbers
Economists had expected inflation to jump from 2.4% in February to about 3.3% in March, the consensus of multiple forecasts reviewed by CBS News. The CPI, which tracks prices for a basket of household goods and services, shows energy costs were the main driver: energy prices climbed 10.9% from the prior month, led by a spike in gasoline.
Brent crude traded around $73 a barrel before the war began on Feb. 28 and was about $95.88 as of Friday morning, with the U.S. benchmark near $97. Gasoline prices rose 21.2% from February — the largest monthly increase since 1967 — and U.S. pump prices have jumped nearly 40% since the conflict began. The national average stood at $4.15 a gallon on Friday, according to AAA. A two-week ceasefire announced between the U.S. and Iran could ease prices if it holds, but experts say it likely will take weeks for prices to fall below $4 a gallon.
Core inflation, which excludes volatile energy and food, rose 0.2% month over month and 2.6% year over year, below economists’ expectations. That softer core reading led some market observers to say the economy may have room to absorb the energy-price shock without broader, persistent inflation.
Context and other measures
The CPI report follows the Personal Consumption Expenditures price index, another key inflation gauge, which showed PCE rose 2.8% year over year in February — above the Federal Reserve’s 2% target and unchanged from January.
What the experts say
Economists warned that higher energy costs could spill into other categories this year. A sharp rise in diesel raises transportation costs, which can push up prices for apparel, food and shipping. Heather Long, chief economist at Navy Federal Credit Union, said food, travel and shipping costs are likely to rise in April and exacerbate consumer pain.
Airlines have already reacted to higher fuel costs by raising fares and, in some cases, adding or increasing fees; airline fares were up 14.9% year over year in March. Analysts at Yardeni Research and Oxford Economics noted that inflation was already trending up before the war and that the duration and intensity of the conflict is a key wildcard for inflation and monetary policy. Oxford Economics’ Bernard Yaros also pointed to a statistical quirk from the recent government shutdown that may add upward pressure to April’s CPI.
Despite the headline jump, some economists emphasized differences from the 2022 inflation spike tied to the pandemic and Russia’s invasion of Ukraine: global supply-chain stress indicators are not signaling the same level of strain, and the labor market has not added the kind of inflationary pressure seen in 2022. Higher gasoline costs will likely force households to trim non-discretionary spending over time, which could help tamp down inflation.
Implications for interest rates
Most analysts expect the Federal Reserve to hold rates in the near term while it gauges the inflationary impact of the Iran war. The lower-than-expected core reading suggests energy-driven headline moves have not fully permeated the broader inflation picture, reducing immediate pressure for a Fed response. Raymond James chief economist Eugenio Aleman said that if gasoline increases don’t translate into higher core inflation, the Fed is unlikely to react to headline “noise.”
The Fed is scheduled to meet April 28–29. At its March meeting, the central bank maintained the federal funds rate at 3.5%–3.75% and penciled in one rate cut for 2026, though minutes from that meeting signaled some policymakers might be open to raising rates if inflation stays above target.
Edited by Aimee Picchi