US inflation hits 3.8% as Iran war drives petrol prices up 28%

The US Labor Department's consumer price index rose 3.8% in April 2026 compared to a year earlier, marking a sharp acceleration from recent months as the ongoing war with Iran pushed energy prices higher. On a month-to-month basis, inflation climbed 0.6%, down from 0.9% the previous month. The primary driver was a 28% year-over-year surge in petrol prices, with the AAA motor club reporting average regular gasoline at over $4.50 per gallon — about 44% more than the same time last year. However, so-called core inflation, which excludes volatile food and energy costs, rose only 0.4% monthly and 2.8% annually, suggesting the energy price shock has not yet broadly spilled over into other sectors.

Grocery prices rose 0.7% from March to April, led by meat prices, after a slight decline the month before. The data paints a picture of a two-track economy: energy-driven headline inflation is high, but underlying price pressures remain relatively contained. Heather Long, chief economist at Navy Federal Credit Union, noted that 'inflation is the key drag on the US economy now,' adding that 'for the first time in three years, inflation is eating up all wage gains.' She described a 'real financial squeeze' for middle-class and lower-income households, forcing them to cut spending and stretch every dollar. The report raises questions about whether the Federal Reserve will need to reconsider its rate-cutting stance as the geopolitical conflict continues to elevate energy costs.