Iran war drives annual inflation to 3.8%, highlighting renewed price pressures across energy, food and essential goods
Gas prices are displayed at a gas station as the prices of oil and gas surge, amid the Iran war, in Titusville, Florida, US, March 31, 2026.PHOTO:REUTERS
WASHINGTON:
United States inflation accelerated for a second straight month in April as rising energy and food costs, driven by the ongoing Iran war, added fresh pressure on households and deepened concerns over the economic outlook, according to official data released on Tuesday.
The Consumer Price Index (CPI) rose 0.6% in April, following a sharp 0.9% increase in March, the US Labour Department said. The latest reading pushed annual inflation to 3.8%, the highest level in three years, underscoring renewed price pressures across energy, food and essential goods.
Energy costs were a major driver, rising 3.8% and accounting for more than 40% of the monthly increase. Gasoline prices climbed 5.4%, fuel oil rose 5.8%, and electricity prices also increased, reflecting volatility in global oil markets amid geopolitical tensions.
Food prices also surged 0.5% after remaining flat in March, with grocery costs rising 0.7%. Beef prices jumped 2.7%, while fruits, vegetables, dairy and beverages also recorded notable increases.
Excluding food and energy, core inflation rose 0.4%, the highest increase since early 2025, suggesting broader price pressures in the economy. Shelter costs, including rent and owners’ equivalent rent, also edged higher.
The data comes amid heightened economic uncertainty linked to the Iran conflict, which has disrupted global oil flows and pushed energy markets into volatility. Economists warn that continued instability in the Strait of Hormuz — through which nearly 20% of global oil shipments pass — could further tighten supplies and fuel inflation.
The inflation report also reinforced expectations that the US Federal Reserve may maintain interest rates at current levels for an extended period. Traders are now fully pricing in a hold at the upcoming policy meeting, with no immediate cuts expected.
Meanwhile, billionaire investor and Bridgewater Associates founder Ray Dalio warned that the US economy is entering a “stagflationary” phase, where inflation remains high while growth slows.
Speaking to CNBC, Dalio said the combination of rising energy prices, geopolitical instability and slowing economic momentum is creating a difficult policy environment for the Federal Reserve. “We are clearly in a period of stagflation,” he said, cautioning that premature interest rate cuts could damage the central bank’s credibility.
Dalio also highlighted growing risks in global markets, particularly from the Iran conflict and disruptions to energy supply chains. He said uncertainty over control of the Strait of Hormuz was a key factor driving inflation expectations higher.
Amid these risks, he reiterated his long-standing view that gold should play a greater role in investment portfolios, recommending allocations of 5% to 15%, calling it “money” and a key diversification tool in a shifting global financial system.
Despite the inflation surge and geopolitical uncertainty, US equities have shown resilience, supported by strong corporate earnings, though analysts caution that rising energy costs and persistent inflation could test market stability in the months ahead.
