The nationwide sticker shock put pressure on US President Donald Trump, who has ordered peace talks with Iran and faces mid-term elections in November.
The rate of inflation rose to 3.3 percent year-on-year in March, according to the US Bureau of Labour Statistics (BLS). By comparison, this same consumer price index (CPI) was 2.4 percent year-on-year a month earlier.
Petrol prices surged by 21.2 percent between February and March – the largest monthly increase since the government began publishing a related index in 1967, the US Bureau of Labour Statistics (BLS) said.
Markets had anticipated the surge, according to the consensus published by MarketWatch.
The United States and Israel began bombing Iran on February 28 and Tehran retaliated by blocking traffic in the Strait of Hormuz, a waterway used to carry a fifth of the world’s oil and gas deliveries.
Despite being the world’s top producer of crude oil, the United States also felt the pain, as prices at the petrol pump shot up.
A gallon (3.78 litres) of regular petrol currently costs an average of US$4.15 in the United States, compared to approximately US$3 just before the war.
The Trump administration – elected in part on a promise to quash inflation – maintains that the war’s economic disruptions will be temporary.
Reacting to the data out on Friday, White House spokesperson Kush Desai said the US economy “remains on a solid trajectory.”
Economic advisor Kevin Hassett claimed some wins for the White House, citing drops in the price of eggs, beef and concert tickets on Fox News.
US Vice President JD Vance said on Friday he hoped for a “positive” outcome as he departed Washington for US-Iran peace talks in Pakistan this weekend.
But experts predicted more economic pain ahead due to the war in Iran, especially for middle and lower-income households already squeezed by rising energy and airfare prices.
Heather Long, chief economist at Navy Federal Credit Union, said that inflation soared in March to the highest level in almost two years.
“This is only the beginning. Food prices, travel and shipping costs are all going up in April and will exacerbate the pain,” she said.
“March CPI was as expected, so no surprises. But there is a huge increase in fuel prices, boosting inflation,” said Christopher Low of FHN Financial.
“And we got the news last night that the ceasefire is not being honoured by either side, apparently,” he said. “There’s still very little traffic through the Strait of Hormuz.”
Some economists calculate the oil price surge will cost each US household at least US$350 per household.
Consumer sentiment also dipped sharply – 11 percent – this month, according to a University of Michigan survey.
During the Federal Reserve’s most recent meeting in mid-March, Chairman Jerome Powell said that the war risked delaying efforts to bring inflation under control in the United States.
The US central bank’s target for inflation is two percent – an objective it has not met in five years due to the Covid pandemic, the war in Ukraine and tariffs. (AFP)
