Anabelle Colaco
13 May 2026

WASHINGTON, D.C.: U.S. inflation accelerated to its highest level in three years in April as rising gasoline prices linked to the Iran war increased costs for consumers and squeezed household budgets.

The Labor Department said on May 12 that the consumer price index rose 3.8 percent from a year earlier, up from 3.3 percent in March and the biggest annual increase since 2023.

Consumer prices rose 0.6 percent in April, slower than the 0.9 percent increase from February to March but still reflecting significant pressure from higher energy costs.

Gasoline prices rose 5.4 percent from March and were more than 28 percent higher than a year earlier, according to government data.

The AAA said the national average price for regular gasoline was above US$4.50 a gallon on Tuesday, roughly 44 percent higher than at the same time last year.

Excluding food and energy, so-called core inflation remained more moderate. Core consumer prices rose 0.4 percent in April from the previous month and 2.8 percent from a year earlier, suggesting the surge in fuel costs has not yet spread widely across the economy.

Grocery prices increased 0.7 percent in April, with meat prices rebounding after a slight decline the previous month.

"Inflation is the key drag on the U.S. economy now," Heather Long 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."

After adjusting for inflation, average hourly wages fell 0.3 percent from a year earlier, marking the first annual decline in real wages in three years.

Inflation had been easing steadily from its 9.1 percent peak in June 2022, but remained above the Federal Reserve System's two percent target.

Price pressures intensified after the United States and Israel launched attacks on Iran on February 28. Iran responded by shutting access to the Strait of Hormuz, a key shipping route that normally handles about one-fifth of the world's oil and liquefied natural gas.

The disruption sent global oil prices sharply higher and drove up fuel costs across the United States.

The stronger inflation reading is likely to reinforce the Federal Reserve's cautious stance on interest rates as policymakers assess whether higher energy prices will trigger broader price increases.

President Donald Trump has criticized the Fed and outgoing Chair Jerome Powell for resisting calls to cut rates.

Some companies are already reporting weaker demand. Whirlpool Corporation said last week that quarterly revenue fell nearly 10 percent and described the impact of the war as a "recession-level industry decline."

Consumers are also scaling back discretionary spending as rising prices for fuel, food, and transportation put increasing pressure on household finances.