Updated April 10, 2026 — A surge in global energy costs tied to the Iran war pushed U.S. inflation sharply higher in March, with the Consumer Price Index registering a 3.3% annualized increase — the strongest reading in nearly two years.
What happened
Economists had anticipated inflation climbing from 2.4% in February to roughly 3.3% in March, a consensus reflected in forecasts reviewed by CBS News. Energy was the dominant force: overall energy prices rose 10.9% month over month, driven principally by a spike in gasoline.
Oil and gasoline moves
Brent crude traded near $73 per barrel before the conflict began on Feb. 28 and was about $95.88 as of Friday morning; the U.S. benchmark was close to $97. Gasoline prices jumped 21.2% from February — the largest monthly gain since 1967 — and U.S. pump prices have climbed nearly 40% since the hostilities began. The national average for a gallon stood at $4.15 on Friday, according to AAA. A two-week ceasefire announced between the U.S. and Iran could ease market pressure if it holds, but analysts say it would likely take weeks for national pump prices to fall back below $4 a gallon.
Core inflation and broader measures
Core CPI, which excludes food and energy, rose just 0.2% month over month and 2.6% year over year, a softer outcome than many economists had expected. That milder core reading led some market observers to suggest the economy might absorb the energy shock without spawning broad, persistent inflation.
The CPI report follows other gauges of price growth: the Personal Consumption Expenditures price index showed PCE inflation at 2.8% year over year in February, above the Federal Reserve’s 2% objective and unchanged from January.
Expert perspectives and spillovers
Economists warned that elevated fuel costs could ripple into other categories later in the year. Higher diesel and jet-fuel prices boost transportation and shipping expenses, which can lift prices for food, apparel and freight-sensitive goods. Heather Long, chief economist at Navy Federal Credit Union, forecast rising costs for food, travel and shipping in April that would deepen consumer strain.
Airlines have already responded to higher fuel bills by raising fares and adding fees; airline prices were up 14.9% year over year in March. Analysts at Yardeni Research and Oxford Economics noted that inflation was trending upward even before the Iran conflict, and said the conflict’s duration and intensity remain key uncertainties for both inflation and monetary policy. Oxford’s Bernard Yaros also highlighted a statistical effect from the recent government shutdown that may push April’s CPI higher.
How this differs from 2022
Several economists emphasized that the current episode differs from the 2022 inflation surge linked to the pandemic and Russia’s invasion of Ukraine: global supply-chain stress indicators are not showing the same level of strain, and labor-market dynamics have not produced the same inflationary pressures seen in 2022. Still, sustained high gasoline costs could force households to cut discretionary spending over time, which may help moderate inflation.
Implications for the Fed
Most analysts expect the Federal Reserve to hold rates in the near term while it assesses the inflationary impact of the energy shock. The relatively soft core CPI reduces immediate pressure for policy action; Raymond James chief economist Eugenio Aleman said that unless gasoline-driven increases translate into higher core inflation, the Fed is unlikely to respond to headline volatility.
The Fed is set to meet April 28–29. At its March meeting, policymakers left the federal funds rate at 3.5%–3.75% and signaled one rate cut penciled in for 2026, though minutes from that meeting indicated some officials would consider raising rates again if inflation remains above target.