US inflation jumps to 3.8% as energy costs surge from Iran war

The key measure of US inflation rose in April to its highest level since May 2023 as consumers feel the impact of the Iran war.

In April 2026, U.S. consumer prices surged to a three-year high, driven largely by rising energy prices linked to the ongoing Iran war. The Consumer Price Index (CPI) climbed 3.8% over the previous 12 months, up from 3.3% in March, marking the highest inflation rate since 2023. Core CPI, which excludes volatile food and energy prices, rose more moderately at 2.8%, up from 2.6% in March. The conflict, particularly the effective closure of the Strait of Hormuz, has created an energy shock that economists warn could soon affect other sectors as increased production costs are passed on to consumers. This inflationary environment complicates the Federal Reserve's policy decisions, with inflation persistently above its 2% target for five years. Despite rising prices, the labor market remains stable, reducing pressure on the Fed to lower interest rates. Additionally, the inflation data may be partially distorted by the previous year's government shutdown. The situation comes at a politically sensitive moment, as President Trump's nominee prepares to assume leadership at the central bank.

U.S. consumer prices increased by 3.8% in April 2026 compared to the previous year, driven largely by a surge in energy costs due to a 10-week war involving Iran. Month-over-month, prices rose 0.6% from March, with gasoline prices up 5.4%. Core inflation, which excludes food and energy, rose more modestly—0.4% from March and 2.8% compared to April 2025—suggesting limited spillover effects so far. Inflation had previously been in decline since peaking at 9.1% in June 2022, but spiked again following the U.S. and Israeli strikes on Iran and Iran's closure of the Strait of Hormuz, a major global energy passage. In response, the Federal Reserve has paused plans to cut interest rates, awaiting further developments. President Donald Trump criticized the Fed for not lowering rates, pushing for Kevin Warsh to replace Jerome Powell as chair. Meanwhile, consumers and businesses are feeling the strain, with gas prices surpassing $4.50 per gallon and companies like Whirlpool reporting major revenue drops due to waning consumer confidence.

US inflation jumped to 3.8% in April as the war in the Middle East continued to drive energy prices and everyday costs for Americans. Prices rose 3.8% over the last year, according to the data from the Bureau of Labor Statistics, the highest jump since 2023. This is the second official measure of the consumer price index, which measures the price of a basket of goods and services, since the start of the war with Iran. In March, prices rose 3.3%, up from 2.4% in February. Energy prices continued to climb, reflecting the national average price for a gallon of gas which is more than a dollar higher than a year ago, according to data from AAA. Higher energy prices directly stem from the ongoing closure of the Strait of Hormuz, where a fifth of the world’s oil and gas would typically pass through. Oil prices continued to climb Monday after Donald Trump called Iran’s response to US peace proposals “totally unacceptable”. Iran suggested a shorter moratorium period and refused to dismantle its nuclear facilities. It’s not just Americans who are feeling the costs of war: Australia, Canada, South Korea and other countries have all reported rapidly rising inflation. British households are bracing for a new cost of living crisis, according to a new survey from PwC released on Monday, and Asia’s manufacturing sector has already reported signs of strain and started to drive up costs. Despite the rise in prices, the Trump administration is still continuing its campaign for lower interest rates, which would make borrowing money cheaper in the US. The Fed typically raises interest rates during times of heightened inflation in order to cool spending and ease prices. Though Kevin Warsh, the incoming US Federal Reserve chair, has made it clear he agrees interest rates should be lower, rising inflation may make it harder for him to make the case to do so. Warsh will have to convince the rest of the Fed’s 11 voting members that, despite increasing prices, the Fed should continue cutting rates. Just one member of the board voted to lower rates at its meeting last month, with the board citing slow job growth and uncertainty in the Middle East as key factors in its decision. Rates currently sit at a range of 3.5% to 3.75%. The US Senate is expected to confirm Warsh as Fed chair in the coming days. The end of outgoing Fed chair Jerome Powell’s term is on Friday.