US inflation jumps to 3.8% in April, highest in nearly three years, as war in Iran disrupts economy
Inflation in the United States surged to 3.8 per cent in April, marking the highest level in roughly three years, as the war in Iran causes ripple effects across the US economy, data released on Tuesday showed.
Inflation rose broadly in line with economists’ expectations overall. Compared with the previous month, consumer prices increased by 0.6 per cent. The Bureau of Labor Statistics noted that core inflation, which excludes food and energy costs, also increased by 0.4 per cent as compared to March.
Prices increased across categories, including household furnishings, airline fares, personal care, clothing, and education. Meanwhile, costs for new vehicles, communication services, and medical care declined in April.
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US inflation surged to 3.8% in April, the highest in nearly three years, primarily due to the war in Iran disrupting the economy and causing energy prices to soar. Energy prices alone accounted for over 40% of the monthly increase in consumer prices.
The US-Israel war in Iran led to the closure of the Strait of Hormuz, causing a significant oil shock. This has driven oil prices up over 70% since the start of the year, pushing the average gas price to $4.50 per gallon and contributing to broader inflationary pressures.
While current inflation fears are reignited by rising energy prices, it is not considered 1970s-style stagflation. The US economy is more resilient due to reduced oil intensity, alternative energy sources, and improved fuel efficiency, leading to what is described as ‘stagflation lite’ rather than galloping inflation.
Inflation is currently rising faster than wage growth in the US, which is eating into Americans’ wages. Wage gains have been slowing over the past two years, and higher gas prices and tariffs threaten to make goods more expensive, worsening affordability pressures for consumers.
The ongoing geopolitical uncertainty, including the Iran conflict and elevated oil prices, is putting pressure on markets. Semiconductor stocks, which have led the market rally, are showing signs of fatigue as investors worry about inflation spreading beyond energy.
Energy prices soar 3.8% in April
Additionally, energy prices soared by 3.8 per cent in April, accounting for more than 40 per cent of the overall monthly increase in consumer prices. Shelter costs also rose, increasing 0.6 per cent during the month. Food prices were up 0.5 per cent, driven by a 0.7 per cent rise in grocery prices, while dining-out costs increased 0.2 per cent.
US inflation climbs from 3.3% in March
Overall inflation rose to 3.8 per cent in the 12 months through April, up from 3.3 per cent in March and 2.4 per cent in February, when it was only slightly above the Federal Reserve’s 2 per cent target. Core inflation, which excludes food and energy prices, increased 2.8 per cent annually, compared with 2.6 per cent in March. Energy prices surged 17.9 per cent over the past year, while food prices rose 3.2 per cent, following an oil shock triggered by the US and Israel’s war in Iran that began in late February.
Inflation eating into America’s wages
According to NBC News, as inflation continues to rise, it is eating into America’s wages at a rapid pace. The pace of wage gains has been slowing over the past two years. In November 2025, wage growth was rising at a pace of roughly 4 per cent. In March, it had fallen to 3.4 per cent.
Elaborating further, an NBC report published in April showed that Americans are now receiving smaller pay raises as tariffs and higher gas prices are threatening to make everything expensive.
Inflation in April rose faster than wage growth, potentially worsening the affordability pressures already facing consumers.
US-Iran war disrupts energy prices
The US-Israel war in Iran prompted the Iranian closure of the Strait of Hormuz, a key waterway through which a fifth of the world’s oil supply was transported before the war. The shutdown has prompted one of the largest oil shocks ever recorded.
According to ABC News, Washington is a net exporter of petroleum, which means that it produces more oil than it consumes. But since oil prices are set in the global market, US oil prices are now moving in response to swings in worldwide supply and demand.
Oil prices surge in US
As of Tuesday morning, oil prices had risen more than 70 per cent since the start of the year, and the average price of a gallon of gas was $4.50, marking an increase of $1.52 per gallon since the war began on 28 February. That amounts to a roughly 50 per cent price jump in about two-and-a-half months.
Rising fuel prices also pushed up costs for transportation services that rely heavily on fuel, including air travel. Airfare prices climbed more than three per cent in March compared with the previous month.
Analysts had earlier warned that higher fuel costs could soon affect the prices of groceries, furniture, and other goods transported by diesel-powered trucks and tankers.
The increase in prices has also weighed on consumer confidence. In May, consumer sentiment fell to its lowest level since the University of Michigan began tracking the data in 1978, ABC News reported.