An upcoming inflation report will provide a new read on consumer prices as higher fuel costs tied to the Iran conflict push up gasoline, airfares and other expenses.
Economists forecast consumer prices rose about 3.8% in April year over year, up from 3.3% in March. That follows a reading of roughly 2.4% in February, close to the Federal Reserve’s 2% target. The acceleration in April reflects a steep jump in gasoline costs after disruptions tied to the Middle East fighting.
The closure of the Strait of Hormuz in March — a key maritime route that handles roughly one-fifth of global oil shipments — triggered one of the largest oil shocks in recent memory. Even though the United States is a net exporter of petroleum, U.S. pump prices move with global oil markets. Crude oil is the primary input for motor fuel and typically accounts for more than half of the price paid at the pump.
As of Monday, the average U.S. gallon of gasoline stood around $4.52, about $1.54 higher than when the conflict began on Feb. 28 — roughly a 52% increase in about two-and-a-half months. The jump in fuel costs has already raised prices for gas-dependent services, most notably airfares, which rose more than 3% in March. Analysts warn the higher cost of diesel and gasoline could spread quickly to groceries, furniture and other goods transported by truck.
The rapid price increases have weighed on consumer confidence. A University of Michigan survey released in May found sentiment at its lowest level on record since the survey began in 1978. Because consumer spending makes up roughly two-thirds of U.S. economic activity, prolonged weakness in sentiment and spending could slow the broader economy.
Still, some indicators suggest resilience. Hiring remained solid in April, with unemployment steady at about 4.3%, and first-quarter 2026 GDP grew at an annualized rate near 2%, an uptick from the prior quarter.
A persistent inflation uptick, however, would raise pressure on the Federal Reserve to tighten policy. The Fed has held interest rates steady at meetings this year after cutting rates by a quarter-point three times earlier. Markets currently price roughly a 70% chance that interest rates will remain unchanged for the rest of the year.
The forthcoming inflation report will be watched closely for signs of whether recent fuel-driven price pressures are temporary or the start of a more sustained broad-based inflation trend that could influence Fed decisions and consumer behavior in the months ahead.