The Iran war is hitting home as gasoline prices fuel inflation surge of 3.8% in the US

WASHINGTON (AP) — U.S. consumer prices climbed sharply again last month as the 10-week war with Iran delivered higher gasoline prices and more pain for Americans. The Labor Department's consumer price index rose 3.8% from April 2025, the biggest jump in three years, and up from a 3.3% year-over-year gain in March. On a month-to-month basis, April prices rose 0.6% from March as gasoline prices rose 5.4%, according to the data released Tuesday. The month-over-month gain was down from 0.9% increase in overall prices from February to March, when the initial shock of the war hit the U.S. economy. Labor Department figures showed that gasoline prices are up more than 28% compared with a year ago. However, the AAA motor club listed the average regular gallon of gasoline above $4.50 on Tuesday, about 44% more than it cost last year at this time. Excluding volatile food and energy costs, so-called consumer core prices rose 0.4% last month from March and 2.8% from April 2025, relatively modest readings that suggest the energy price burst has yet to spill over more broadly into prices for other goods. Grocery prices rose 0.7% from March to April as meat prices rose after they had declined slightly in the month before. Prices are rising at time when Americans are already frustrated by the high cost of living. Affordability is likely to be a key issue when voters go to the polls Nov. 3 to determine whether President Donald Trump's Republican Party maintains control of the U.S. Senate and House of Representatives. "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." In April, average hourly wages fell 0.3% from a year earlier after accounting for inflation – the first year-over-year drop in three years. Inflation had been dropping more or less steadily since peaking with a 9.1% year-over-year spike in June 2022, a surge caused by supply chain bottlenecks at the end of COVID-19 lockdowns and a jolt for energy prices following the Russian invasion of Ukraine. But inflation remained has above the Federal Reserve's 2% target. Then, the United States and Israel attacked Iran on Feb. 28, and Tehran responded by shutting off access to the Gulf of Hormuz through which a fifth of the world's oil and liquefied natural gas passes. That has sent oil prices, and most visibly gasoline, racing higher. The Fed, which had been expected to cut its benchmark interest rate in 2026, has turned cautious as it waits to see how long conflict lasts and whether higher energy prices spill over into other products and cause a broader inflationary outbreak. Trump has lambasted the Fed and its outgoing chair, Jerome Powell, for refusing to slash rates to boost the economy. Kevin Warsh, the president's hand-picked choice to succeed Powell, is expected to be confirmed by the Senate this week; but it's unclear whether Warsh would pursue lower rates given the uncertainties arising from the war — or whether he could persuade his colleagues on the Fed's rate-setting committee to go along if he tried. Some companies are also starting to feel the pain. Whirlpool, which makes KitchenAid and Maytag appliances, reported last week that revenue dropped nearly 10% in its most recent quarter and said that the war has caused a "recession-level industry decline″ that has undermined consumer confidence. Grace King of Ames, Iowa said that higher prices in the food aisle and at the pump are making her cut back on spending for things like clothing. The administrative assistant, 31, used to spend $200 per month on clothing, mostly on Amazon, but not anymore. "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." For example, King noted that while it's only a five-minute drive to work, she makes the trip twice a day. And if she needs to do any big shopping, that's a 40-minute drive to malls in Des Moines, Iowa.