Inflation Jumps as Iran War Drives Gas Prices

Inflation soared in the past month, driven in part by rising gas prices and the effects of the Iran war, according to new government figures — a finding underscoring the financial squeeze employees are experiencing.

In a highly anticipated report, the consumer price index (CPI) increased 0.9% on a seasonally adjusted basis in March and rose 3.3% year-over-year, the U.S. Bureau of Labor Statistics (BLS) reported April 10. That’s well above last month’s annual inflation figure of 2.4%.

The index for energy rose 10.9% in March, led by a 21.2% increase in the index for gasoline which accounted for nearly three quarters of the monthly all items increase, the BLS reported. The shelter index also increased in March, rising 0.3%. The index for food was unchanged over the month as the index for food away from home rose 0.2%, while the index for food at home fell 0.2%.

Core inflation, which excludes volatile food and energy prices, also rose in March, climbed just 0.2% in March and 2.6% annually.

The report, which was announced days after President Donald Trump announced a ceasefire with Iran for two weeks, is significant as it provides “the first clear indication of how the ongoing U.S.-Iran conflict is affecting domestic prices,” said Andrea Medici, labor economist at SHRM.

Medici added it’s important to note that other factors may have contributed to the rise in inflation in March, although to a smaller extent, such as the sustained impact of tariffs and higher import costs, as well as elevated health care costs.

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The data is the latest indication of financial strain on workers and employers. Persistent high costs and broader economic uncertainty have pushed employee financial confidence to its lowest level in 14 years, according to recent MetLife data.

“We’ve seen financial confidence continue to decline over the past five years, but it’s not entirely surprising when you look at what employees are dealing with day to day,” said Todd Katz, executive vice president and head of group benefits at insurance firm MetLife in New York City.

Gas prices have added to that burden. The average price of regular gasoline has surpassed $4.15 per gallon, increasing costs for workers who commute regularly. “Rising fuel costs are especially significant, as they directly impact transportation and logistics, which ultimately drives higher prices across a wide range of products and services,” Medici said.

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A recent SHRM pulse survey found that roughly half of U.S. workers said the Iran war has had at least a moderate impact on their mental health — 47% of U.S. workers said the U.S. role in the conflict with Iran had a very significant, significant, or moderate impact. 

The inflation report may add pressure on employers to find ways to support employees through financial benefits, commuter perks, and other assistance.

Additionally, Medici warned, depending on the duration of the conflict, “we may see broader spillover effects across other sectors of the U.S. economy, further amplifying the impact on prices and business operations.”

Adding to financial pressures for employees, real earnings also declined in March, the BLS reported separately April 10. Real average hourly earnings for all employees decreased 0.6% from February to March, seasonally adjusted. This result stems from an increase of 0.2% in average hourly earnings combined with an increase of 0.9% in the CPI, the BLS reported.