WASHINGTON (AP) — The largest monthly jump in gas prices in six decades caused a sharp spike in inflation in March, creating major challenges for the inflation-fighters at the Federal Reserve and heightening the political hurdles for the White House.
Consumer prices rose 3.3% in March from a year earlier, the Labor Department said Friday, up sharply from just 2.4% in February and the biggest yearly increase since May 2024. On a monthly basis, prices rose 0.9% in March from February, the largest such increase in nearly four years.
It’s the first read on inflation to capture the effects of the Iran war. The spike in gas prices will stretch the budgets of many lower- and middle-income households as it erodes their incomes, making it harder to afford other necessities such as food and rent
Excluding the volatile food and energy categories, core prices rose 2.6% in March from a year earlier, up from 2.5% in February. And last month core prices rose a modest 0.2%, suggesting that rising gas prices haven't yet spread to many other categories.
A big question for now is how long the oil and gas price shock lasts and whether it will lead to a broader, long-lasting inflation spike, similar to what happened in the spring of 2022 after Russia invaded Ukraine. For now, economists say that it is unlikely the U.S. will see a widespread increase similar to a few years ago, when inflation topped 9%.
Despite a tenuous cease fire, little has changed in the Strait of Hormuz, a bottle neck where millions of barrels of oil typically pass daily.
“It’s painful in the near term,” said Michael Pearce, chief U.S. economist at Oxford Economics. “It’s going to get more painful in April,” when further gas price increases will lift inflation higher.
But Pearce said the impact may be shorter-lived than after the pandemic: “I think the conditions are much more like a short, sharp shock than what we saw in 2022.”
Pearce said that the impact could fade by later this year: "I think the conditions are much more like a short, sharp shock than what we saw in 2022.”
Last month, grocery prices slipped 0.2% and are up just 1.9% from a year earlier. Analysts do expect food prices to move higher in the coming months as soaring diesel prices make shipping more expensive.
Higher energy costs are “contributing to rising production costs across the food supply chain and could put upward pressure on grocery prices going forward,” said Andy Harig, a vice president at the grocery trade group FMI-The Food Industry Association. “As energy prices increase, the costs associated with producing and delivering food also rise.”
Clothing costs rose 1% in March from the previous month and are up 3.4% from a year earlier. Used car prices, however, fell 0.4% last month and down 3.2% from a year earlier.
The gas price shock stemming from the Iran war has shifted inflation’s trajectory, from a slow, gradual decline to a sharp increase further away from the Fed’s 2% target. As a result, the central bank will almost certainly postpone any cut in interest rates for months. Many Fed officials will look past the increase in headline inflation, however, and focus on core prices, which are likely to rise more slowly.
Gas prices are also a highly visible cost that has outsize impacts on consumer confidence and political sentiment. High prices had angered American voters before the war and the spike in prices for oil and everything that entails, from the pump to the grocery store, could make it more difficult for the president’s party to hold on to seats in both the House and the Senate in next year’s midterms.
Polling by the Associated Press-NORC Center for Public Affairs Research last month found that about six in 10 Republicans are at least “somewhat” concerned about affording gas in the next few months.
Gas prices averaged $4.15 a gallon nationwide Friday, up from $2.98 on the day before the war began and a hike of nearly 40%, according to motor club AAA.
Inflation reached a peak of 9.1% in June 2022, as COVID-19 snarled supply chains and several rounds of stimulus checks pushed up consumer demand. Prices soared for groceries, furniture, restaurant meals and many other goods and services.
This time, economists say the job market and consumer spending are weaker, and there are no large government stimulus checks being issued to spur demand. The unemployment rate is low, at 4.3%, but companies aren't scrambling to hire the way they were when the economy emerged from the pandemic, which led many firms to offer sharp pay increases to attract and keep workers.
Rapid pay increases and solid income growth helped consumers weather the higher prices that resulted from the pandemic's supply chain disruptions, and fueled spikes in demand that led many companies to raise prices further.
“That’s where this really differs, is that we aren’t seeing anywhere near the strength of demand,” Alan Detmeister, an economist at UBS, said. In 2021 and 2022, income growth “was increasing really strongly. We aren't seeing that now,” he added.
Detmeister thinks the better comparison will likely be to 1990-91, when higher oil and gas prices stemming from Iraq's invasion of Kuwait contributed to a recession, but didn't lead to a jump in inflation, in part because of weaker consumer spending.
The gas price spike's impact on inflation is, in some ways, similar to President Donald Trump's tariffs, in that their effect will depend largely on the size and duration of the increase.
Higher gas prices are tricky for the Fed because they can also slow growth by weighing on consumer spending, potentially causing layoffs. The Fed would typically cut its rate to encourage more spending if unemployment rises, while it raises rates to combat inflation.
Chuck Byrd puts away a fuel nozzel after filling two tanks for a truck at a gas station on Tuesday, April 7, 2026, in Aurora, Ore. (AP Photo/Jenny Kane)
Red & White Crisp Rice cereal is sold for $7.25 per 18-ounce box at a market serving the Central American immigrant community in the Westlake/Pico Union area of Los Angeles, Tuesday, April 7, 2026. (AP Photo/Damian Dovarganes)
Pantry staples, including infant formula and dairy products, are sold at a market serving the Central American immigrant community in the Westlake/Pico Union area of Los Angeles, Tuesday, April 7, 2026. (AP Photo/Damian Dovarganes)
DEIR AL-BALAH, Gaza Strip (AP) — Friday marks six months since Gaza's ceasefire deal took effect, a milestone largely lost in the confusion over the new and even more fragile ceasefire in the Iran war.
The ravaged Palestinian territory of 2 million people has seen the most intense fighting stop between Israeli forces and Hamas-led militants. But most of the ceasefire work remains to be done, from disarming Hamas and ending its two-decade rule to deploying an international stabilization force and beginning vast reconstruction. Gaza residents are in limbo, with limited aid entering through a single, Israeli-controlled border post.
Such challenges could represent what’s to come in the latest war, as U.S. President Donald Trump’s approach to peacemaking appears to be stopping bombardment and leaving the bigger picture for others to work out.
Whether Trump can force through that kind of deal on Iran, with more actors in play and global markets quivering at every statement, is yet to be seen.
Focusing on a deal's details is crucial. Already the Iran war's two-week ceasefire has created deadly confusion over Lebanon as Israel insists the deal doesn’t apply there and continues to attack the Iranian-backed Hezbollah, while Iran insists it does and threatens to upend the agreement. Israel made a surprise announcement Thursday authorizing direct negotiations with Lebanon, despite the lack of diplomatic ties.
Not long ago, the U.S.-created and Trump-led Board of Peace kicked off with $7 billion in pledges and sweeping intentions of resolving not only Gaza but other conflicts that emerge around the world.
Nine days after the board's initial meeting, the U.S. and Israel attacked Iran.
The Board of Peace has not met again, and it's still waiting for Hamas to respond to its proposal on disarming, a major concession and perhaps the hardest step. Hamas’ charter calls for destroying Israel.
A U.S. official said Hamas has not been given a definite deadline to respond to the proposal but added that “patience is not unlimited.” The official was not authorized to comment publicly and spoke on condition of anonymity.
The lack of a deadline can weaken pressure to act. Meanwhile, diplomacy is busy putting out different flames.
Board of Peace director Nickolay Mladenov told the U.N. Security Council last month that the world should not lose sight of Gaza as a new war flared. The choice in Gaza is between “a renewed war, or a new beginning; the status quo, or a better future,” he added. “There is no third option.”
Palestinians might suggest a third option: neglect.
Six months into the Gaza ceasefire that took effect on Oct. 10, little beyond the largely silenced explosions has changed.
Vast tent camps house most of the territory’s population. Other residents shelter in damaged apartment buildings. Health workers and other humanitarian workers say there has been little progress in the expected surge of medical supplies and other aid.
The U.S. 20-point ceasefire plan for Gaza is largely failing on the humanitarian front, five international aid groups said in a scorecard released Thursday. They said conditions have deteriorated further in Gaza since the Iran war began.
“During the first two weeks of March 2026, trucks entering Gaza declined by 80%, and the price of basic goods increased dramatically,” they said. Medical evacuations have stalled.
Palestinians expressed fading hopes for any immediate improvement in their lives.
"There is pollution and disease. It’s as if there’s no ceasefire at all,” said Maysa Abu Jedian, a displaced woman from Beit Lahiya.
“The war is still ongoing and life is still terrible as it is,” said Eyad Abu Dagga, also sheltering in a camp in Khan Younis.
Tents rippled in the breeze, and children played on the sand against a backdrop of shattered buildings.
While the heaviest fighting has subsided, Israeli forces have carried out airstrikes and fired on Palestinians near military-held zones. Militants have carried out shooting attacks on troops, and Israel has said its strikes are in response to that and other ceasefire violations.
As of Thursday, Israeli attacks have killed 738 people in the six months since the ceasefire, according to Gaza’s Health Ministry. The ministry, part of the Hamas-led government, maintains detailed casualty records that are seen as generally reliable by U.N. agencies and independent experts. It does not give a breakdown of civilians and militants.
Funerals for two cousins were held Friday in Gaza City, a day after they were killed. “We were standing idly, drinking coffee, next to each other. We suddenly saw a (projectile) hitting the men,” said Anwar Saleh, an eyewitness. Israel's military said it had struck a “terrorist” in northern Gaza.
Overall, the health ministry says 72,317 Palestinians had been killed since the war in Gaza began with the Oct. 7, 2023, Hamas-led attack on Israel.
Unwavering focus on Gaza, once at the heart of a passionate international outcry, has been lost with the rise of a new regional war. That, too, has decreased pressure for progress on the ceasefire.
The humanitarian groups' scorecard notes that any forward movement on aid issues in the Palestinian territory has “generally required sustained diplomatic pressure at the highest levels, particularly from the United States. That pressure, however, has not been applied consistently or at the scale needed to secure full implementation.”
The Trump administration is not the only player to be distracted. The entire Middle East, including key Gaza mediators Egypt and Qatar, now focuses on Iran and that war’s effects on their economies.
With the added uncertainty over Israel’s renewed war with Hezbollah in Lebanon, there could be even less interest from countries to contribute troops to a Gaza stabilization force. One of the few confirmed troop contributors, Indonesia, already has seen three of its peacekeepers in southern Lebanon killed in recent days.
Anna reported from Lowville, New York. Associated Press writers Matthew Lee in Washington and Edith M. Lederer at the United Nations contributed.
Find more of AP’s coverage at https://apnews.com/hub/israel-hamas-war
Mourners carry the body of Al Jazeera correspondent Mohammed Wishah, who was killed in an Israeli strike on his vehicle, during his funeral outside Al-Aqsa Hospital in Deir al-Balah, central Gaza Strip, Thursday, April 9, 2026. (AP Photo/Abdel Kareem Hana)
Palestinians youth look on as they stand in an area next to tents at a makeshift camp for displaced people, at sunset in Khan Younis, southern Gaza Strip, Thursday, April 9, 2026. (AP Photo/Abdel Kareem Hana)
Palestinians walk along a street surrounded by buildings destroyed during Israeli air and ground operations in Khan Younis, southern Gaza Strip, Thursday, April 9, 2026. (AP Photo/Abdel Kareem Hana)
Palestinians walk along a street surrounded by buildings destroyed during Israeli air and ground operations in Khan Younis, southern Gaza Strip, Thursday, April 9, 2026. (AP Photo/Abdel Kareem Hana)
Palestinians walk along tents at a makeshift camp for displaced people in Khan Younis, southern Gaza Strip, Thursday, April 9, 2026. (AP Photo/Abdel Kareem Hana)
Palestinians inspect a vehicle struck by an Israeli airstrike in the Maghazi refugee camp in the central Gaza Strip, Saturday, April 4, 2026. (AP Photo/Abdel Kareem Hana)
