March inflation soars, confirming Iran war price shock

U.S. inflation surged in March as the effects from the Iran war hit consumer wallets: The Consumer Price Index rose 0.9%, the biggest monthly increase since 2022, while the annual measure climbed to its highest level in two years.

Why it matters: The first inflation report of the war era captures the higher costs Americans faced last month — with knock-on effects still reverberating through the economy.

By the numbers: In the 12 months through March, CPI was 3.3%, the highest since May 2024, the Labor Department said Friday. The comparable measure for February was 2.4%.

Yes, but: Excluding energy and food costs, the inflation snapshot looks more benign. Core CPI rose 0.2% for the month, matching the same pace as February.

• It was 2.6% in the 12 months ending in March, ticking up from 2.5%.

The big picture: The jump in headline inflation was overwhelmingly driven by a spike in gasoline prices, which rose 21% in March — the largest monthly increase in data that goes back to 1967.

• The CPI report lands as American consumers — already stretched by years of elevated prices — absorb more strain on their budgets, this time stemming from the Iran war.

What to watch: How supply bottlenecks — including for key inputs like fertilizer — will impact consumer costs further in the months ahead.

• For now, it appears the energy shock is not seeping into other, non-fuel-related categories, including food prices, which were flat in March.

The intrigue: The two-week ceasefire includes transit through the Strait of Hormuz, though terms remain murky. Traffic through the strait remains at a standstill.

• Even a full reopening wouldn't undo five weeks of effective closure.
• U.S. and Iranian officials are set to meet Saturday for peace talks.

Editor's note: This story has been updated with additional details.