In March, the pace of consumer inflation in the US accelerated sharply. The main catalyst for the inflation surge was a jump in energy costs amid the escalation of the conflict with Iran, although such dynamics were broadly anticipated by market participants.

According to the US Department of Labor, the Consumer Price Index (CPI) spiked 3.3% year‑on‑year in March, up from 2.4% in February. The reading was slightly below the economists’ consensus of 3.4% but represented the largest increase since June 2022, when oil prices skyrocketed following the start of hostilities in Ukraine.

On a monthly basis, headline inflation jumped 0.9% versus 0.3% a month earlier (analysts had expected 1.0%). The key hit came in the energy segment: prices there surged 12.5% year‑on‑year, a sharp reversal after just a 0.5% rise in February.

Macroeconomic data for March drew market attention because it was the first to reflect the direct economic consequences of the conflict that began with joint US‑Israeli strikes on Tehran in late February. Iran responded by almost entirely blocking tanker traffic through the Strait of Hormuz, a strategic waterway that handles roughly 20% of global oil shipments. Although the US is a net energy exporter, the global nature of pricing pushed the average gasoline price at US pumps above $4 per gallon for the first time in more than three years.

Nevertheless, core inflation (core CPI), which excludes volatile food and energy prices, was 2.6% year‑on‑year and 0.2% month‑on‑month, coming in below forecasts. Given the moderate behavior of core measures, analysts expect the Federal Reserve will not place excessive weight on the headline CPI jump when setting future monetary policy.

At the same time, markets are increasingly worried that a protracted Middle East war could force households to cut spending, which would eventually hit the labor market. So far, employment — another key indicator for the Fed — showed a sharp recovery last month, supporting hopes for stabilization.

With inflation remaining elevated, some economists no longer expect the US central bank to cut borrowing costs in 2026. Moreover, several Fed policymakers have already noted that rate hikes may be necessary under current conditions.