US Inflation Hits 3.8% as Iran War Drives Energy and Food Prices Higher

US consumer prices climbed 3.8% year-over-year in April, the sharpest increase since May 2023, with nearly half the gain attributable to surging energy costs tied to the US-Israel war in Iran. The effective closure of the Strait of Hormuz has pushed oil prices up sharply, lifting the national average for unleaded gasoline to $4.50 a gallon — the highest since mid-2022 — while jet fuel spikes drove airfares up 20.7%. Grocery and housing costs also contributed to the jump from March’s 3.3% reading.

The figures effectively kill expectations of Federal Reserve rate cuts this year and have analysts floating the possibility of hikes. Incoming Fed chair Kevin Warsh, Trump’s pick to replace Jerome Powell, takes over with constrained options despite Trump’s public pressure for looser policy. For the first time in three years, wage growth (3.6%) is trailing inflation, and equities sold off on the release, with the S&P 500 down 0.6%.

The political stakes are sharp ahead of November’s midterms: Trump campaigned on lowering prices, and gasoline costs are historically punishing for incumbents. Trump framed the inflation bump as a short-term cost of preventing a nuclear-armed Iran, noting prices remain well below the 9.1% peak under Biden in 2022.