U.S. consumer prices surged in April, with the war in Iran driving energy costs higher and squeezing household budgets, according to figures released Tuesday by the Labor Department. The consumer price index rose 3.8% from a year earlier, a sharp acceleration from the 3.3% annual rate in March and the biggest jump in three years. On a monthly basis, prices increased 0.6% from March, with gasoline prices alone up 5.4% for the month.
The surge is largely a product of the 10-week-old conflict. The United States and Israel attacked Iran on Feb. 28, and Tehran responded by shutting access to the Strait of Hormuz, a chokepoint for roughly one-fifth of the world’s oil and liquefied natural gas. That has sent crude prices, and in turn gasoline, racing higher. The Labor Department’s data showed gasoline prices up more than 28% compared with a year earlier, while the AAA motor club listed the average regular gallon above $4.50 on Tuesday — about 44% higher than one year ago.
So-called core inflation, which excludes volatile food and energy costs, rose 0.4% from March to April and 2.8% from a year earlier. Those relatively contained readings suggest that the energy price burst has yet to trigger a broader outbreak of inflation across other goods. Still, grocery prices climbed 0.7% from March to April, led by a rise in meat costs after a slight decline the prior month.
The squeeze on consumers is already showing up in other measures. Average hourly wages, after accounting for inflation, fell 0.3% from a year earlier — the first year-over-year decline in real wages in three years. “Inflation is the key drag on the U.S. economy now,” Heather Long, chief economist at Navy Federal Credit Union, wrote. “There is a real financial squeeze underway. For the first time in three years, inflation is eating up all wage gains. This is a setback for middle-class and lower-income households and they know it. They are having to cut back on spending and stretch every dollar.”
The inflation picture has shifted rapidly since the Ukraine war and post-pandemic supply chain bottlenecks drove annual consumer price increases to a peak of 9.1% in June 2022. Inflation had been declining more or less steadily since then but remained above the Federal Reserve’s 2% target even before the Iran conflict erupted. Now the central bank has turned cautious about cutting its benchmark interest rate, waiting to see how long the fighting lasts and whether higher energy prices seed broader price pressures.
President Donald Trump has repeatedly criticized the Fed and its outgoing chair, Jerome Powell, for refusing to slash rates. His hand-picked successor, Kevin Warsh, is expected to be confirmed by the Senate this week. It is unclear whether Warsh would push for lower rates given the war-related uncertainties, or whether he could convince colleagues on the rate-setting committee to go along.
Some companies are already feeling the pain. Whirlpool, which makes KitchenAid and Maytag appliances, reported last week that revenue dropped nearly 10% in its most recent quarter, with the company saying the war has caused a “recession-level industry decline” that has undermined consumer confidence.
For individuals, the higher costs mean cutting back. Grace King, a 31-year-old administrative assistant from Ames, Iowa, said she has sharply reduced spending on clothing and other nonessentials. “There’s pressure basically everywhere from the groceries that I buy to the gas to fill up the tank,” she said. “I’ve severely cut back on my frill spending.” King noted that while her commute is short — a five‑minute drive twice a day — any major shopping requires a 40‑minute drive to malls in Des Moines.
The rising cost of living is expected to be a key issue when voters go to the polls in November to decide whether Trump’s Republican Party maintains control of Congress. Affordability has already been a frustration for many households, and the war‑driven inflation surge threatens to deepen that discontent.