Inflation breakdown for March 2026 in one graph

Inflation spiked in March as the Iran war raised gasoline and other prices for consumers.

The Consumer Price Index, a key inflation measure, rose 3.3% in March from a year earlier, the U.S. Bureau of Labor Statistics said Friday. This was up from 2.4% in February.

The March figures are the first CPI report since the Iran war began on February 28, revealing the economic impact on consumers in the first month of hostilities in the Middle East.

The United States and Iran agreed to a two-week cease-fire late Tuesday, but economists said the inflationary effects of the war were likely to take weeks or months to subside, and a prolonged conflict risks pushing up broader consumer prices such as food, airfares and industrial goods.

“Inflation is a problem and it’s only going to get worse,” said Mark Zandi, chief economist at Moody’s. “Clearly, the Iran war is causing significant damage.”

“We were cautiously optimistic about inflation going into this year,” said Thomas Ryan, North American economist at Capital Economics, as price pressures such as tariffs are easing.

“We’re basically on hold for now, just waiting to see what happens with the energy price shock,” Ryan said. “The longer that goes on, the more we become concerned about leakage to other areas of consumers’ wallets,” he said.

The surge in inflation caused by the Iran war is also complicating the Federal Reserve’s job of determining interest rate policy.

At a meeting in March, central bank officials said they expected to cut interest rates once this year, but some said they may have to raise borrowing costs if inflation continues to rise due to the Iran war.

Fed officials also said they needed to remain “agile” given the war’s impact on inflation, which remains above the central bank’s 2% target.

“Inflation is way above what everyone is comfortable with, both consumers and the Federal Reserve, and it’s not going to get any better, at least for the next few months,” Zandi said.

The recent rise in energy prices is related to oil.

Iran has effectively cut off shipping traffic through the Strait of Hormuz, a waterway used to transport about a fifth of the world’s oil supplies. According to reports, the blockade appears to remain largely in place even after the ceasefire.

Oil prices — measured by brent crude oilthe global price benchmark – soared from about $70 per barrel before the conflict began to $118 per barrel by the end of March. The price has since fallen, but it was still rising at about $96 as of Friday.

“We have a two-week ceasefire that we hope will hold, so there’s good news right now,” said Joe Seidle, senior market economist at JPMorgan Private Bank. “Otherwise, we will have the biggest oil supply shock in history since World War II.”

Products refined from petroleum, such as gasoline, diesel and jet fuel, also rose significantly.

Retail gasoline prices rose 18.9% over the year, according to CPI data.

Consumers paid an average of $4.12 per gallon as of Monday, up from about $2.94 before the war started, according to the latest weekly data from the U.S. Energy Information Administration.

According to EIA data, this is the first time the national average price has exceeded $4 per gallon since 2022, when Russia’s invasion of Ukraine caused prices to soar.

On the other hand, soaring oil prices are also having an impact on other areas of household finances.

For example, airlines are raising ticket prices, increasing baggage fees, adding fuel surcharges, and cutting flight schedules to deal with the fallout from the Iran war. All of this is driving up the price tag for travelers.

Companies are doing this to offset rising jet fuel prices, one of airlines’ biggest operating costs.

Airfares rose 14.9% in the past 12 months, according to CPI data.

The increases are particularly noticeable on international flights, where the average round-trip economy fare from the U.S. to Rome was $1,165 as of March 30, up from $846 as of February 23, according to the latest weekly flight data compiled by travel search engine Kayak. Round-trip tickets to Hong Kong rose from $1,042 to $1,403 over the same period.

Deutsche Bank analysts said in a report on Tuesday that if jet fuel prices remained near current levels throughout the year, airlines would have to raise ticket prices by about $50 per one-way fare, or about 17%.

Economists say rising oil prices could also put upward pressure on food prices.

For example, rising diesel prices will impact transportation costs associated with trucking food to grocery stores, they said. Furthermore, fertilizers are another important export item through the Strait of Hormuz, which could lead to higher prices for farmers and consumers.

According to CPI data, food prices rose 2.7% compared to last year. In some categories, such as beef and coffee, specific issues are reducing supply and pushing prices even higher.

Americans may also face increased costs for purchases made through e-commerce sites. Starting April 17, Amazon will begin collecting a 3.5% fuel and logistics surcharge for third-party sellers in the U.S. and Canada. united parcel service and fedex It has also imposed higher fuel surcharges since the start of the Iran war.

Capital Economics’ Ryan said some of the inflationary effects on energy prices could take months to filter through the supply chain and into consumers’ wallets. The impact “could be very far-reaching,” he said.

Of course, the ultimate inflationary impact will depend on the context of the conflict.

Ryan said CPI inflation was likely to fall “relatively quickly” if the conflict ceases by the end of April and the Strait of Hormuz gradually opens. He said he expected it to peak at about 4% and fall to 3% by the end of 2026.

However, he said that if the war lasts longer, there is a greater possibility that inflation will remain high and spread to goods and services.

Even if more oil tankers start passing through the Strait of Hormuz, it could take some time for the situation to normalize, economists say.

For example, damage from energy infrastructure strikes in the Middle East will take time to repair, they said.

JPMorgan Private Bank’s Seidl used the phrase “rocket-like, feather-like” to describe expected price movements, meaning that prices for gasoline and other areas of household balance sheets often rise rapidly during shocks, but then fall slowly.

Seidl also said there would likely be a permanent “risk premium” in oil prices once the dispute is resolved. “Investors know this has happened and it can happen again,” he said.

Analysts said increases in airline ancillary fees, such as checked baggage fees, could also become permanent, especially if demand remains strong.