The war with Iran is threatening to reverse recent gains against inflation, economists say. A CBS News survey of six forecasters finds the Consumer Price Index for March is expected to show prices rising at a 3.3% annual rate — the fastest pace since May 2024 and nearly a full percentage point above February. The government’s CPI report is scheduled for 8:30 a.m. ET Friday.
Analysts warn energy market disruptions tied to the conflict are the main driver. Oxford Economics projects headline CPI will climb “well above 3% in March and above 4% by April.” Pantheon Economics has described the jump in U.S. fuel costs as the largest single-month increase since at least 1957. Even a short, two-week ceasefire between the U.S. and Iran is unlikely to quickly ease global energy shortfalls.
Higher fuel prices ripple through the economy — raising transport costs for food, lifting airfares and increasing production and shipping expenses — a pattern economists call “rockets and feathers,” where prices spike quickly but retreat slowly.
“We’re going to be paying the price for this through much of the year,” said Mark Zandi, chief economist at Moody’s Analytics, pointing to expected increases in travel and grocery bills. Inflation had cooled to a 2.4% annual rate in January and February 2026, below recent peaks but still above the Federal Reserve’s 2% target and far under the 9.1% high in June 2022.
After the U.S. announced a truce, the U.S. oil benchmark dropped nearly 15% to about $96.41 a barrel. That decline, however, still leaves prices roughly 43% higher than before the conflict began, suggesting limited near-term relief for consumers. The Democratic minority on the Joint Economic Committee estimated Americans paid an extra $8.4 billion in fuel costs in the month after the fighting began.
Rising energy costs can spread into broader household pain by lifting prices across goods and services and adding upward pressure on interest rates, which can further squeeze budgets and borrowing costs.
If consumers cut back on spending, the effect would be wide-ranging because consumer expenditures make up roughly 70% of U.S. gross domestic product, Federal Reserve Bank of Chicago President Austan Goolsbee told CBS News. Signs of strain in household finances were already emerging before the conflict: Elizabeth Pancotti of the Groundwork Collaborative highlighted increases in 401(k) hardship withdrawals, falling savings rates, stagnant wage growth and rising delinquencies, warning that another inflationary shock could turn “warning signs” into “major flashing alarm bells.”
Businesses are feeling the pain as well. Disruptions around the Strait of Hormuz affect about 20% of global energy shipments and hinder flows of other commodities like helium, aluminum and fertilizer. Andrew Coppin, CEO of Ranchbot, said higher shipping and fertilizer costs are already squeezing producers and are likely to push beef prices higher this year.
The Federal Reserve faces a delicate balancing act: higher inflation versus an uneven labor market that has swung between job gains and losses. In March the Fed had penciled in a single rate cut for 2026, but rising inflation expectations have led many economists to drop that forecast. Heather Long, chief economist at Navy Federal Credit Union, said the Fed will probably hold rates steady “until the fog of war clears and they can assess the full impacts on the U.S. economy.” Minutes from the Fed’s March meeting indicate some policymakers are even prepared to consider raising rates again if inflation proves persistent.
One tentative easing factor is that the inflationary impact of tariffs imposed under the previous administration appears to be fading. The effective tariff rate has fallen to about 8% from a 21% peak in April 2025, according to the Yale Program on Financial Stability’s Budget Lab, and Oxford Economics’ Bernard Yaros says most of the tariff-related price pass-through has already occurred.
Edited by Alain Sherter