Inflation was cooling. The Iran war could send it racing higher again.
Inflation was cooling. The Iran war could send it racing higher again.
Aimee PicchiThu, April 9, 2026 at 9:00 AM UTC
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The war on inflation could be in for a major setback due to the Iran war.
The Consumer Price Index this week is expected to show March prices rose at a 3.3% annual pace, the average of six separate forecasts reviewed by CBS News. That would mark the highest inflation rate since May 2024 and an almost 1 percentage-point jump from February.
The CPI report will be released at 8:30 a.m. ET on Friday.
"The impact of the war on energy prices will push headline CPI inflation well above 3% in March and above 4% by April," Oxford Economics forecast in a report on Wednesday.
The energy shock is set to reignite inflation (Line chart)
Inflationary pressures are being driven by higher energy prices tied to the Iran war, with the U.S. experiencing the largest one-month jump in fuel costs since at least 1957, according to Pantheon Economics.
The conflict's impact on a wide range of goods and services is likely to last for months, and experts said the two-week ceasefire between the U.S. and Iran is unlikely to immediately ease global energy shortages.
Higher fuel prices could push up the cost of other goods, including food, because of increased transportation and production costs. Energy prices tend to rise quickly during disruptions to oil supplies but fall more slowly after a crisis ends — a phenomenon economists call the "rockets and feathers" principle.
Early-year cooldown
"We're going to be paying the price for this through much of the year," Mark Zandi, chief economist at financial research firm Moody's Analytics, told CBS News. "We should see a bit of a bump in the cost of airline tickets. Grocery prices will probably be a bit higher. Obviously, that goes to transporting food from the port or the farm to the store shelf."
The expected increase in the CPI comes after inflation cooled to a 2.4% annual rate in the first two months of 2026 — still above the Federal Reserve's 2% target but far below the 40-year high of 9.1% recorded in June 2022.
Even before the Iran war sent gas prices soaring, many Americans were still recovering from the pandemic-era inflation spike and continued to cite affordability as a major concern. The Trump administration has said that "gas prices will plummet back to the multi-year lows American drivers enjoyed before these short-term disruptions" from the Iran war.
After the U.S. announced the truce with Iran on Tuesday, the U.S. oil benchmark tumbled almost 15%, falling to $96.41 a barrel. But that remains 43% higher than just before the war, signaling consumers may not see much relief in the next few weeks.
Gas prices over time (Line chart)
Consumers have already paid an additional $8.4 billion in fuel costs in the month after the Iran war started, according to an estimate from the Joint Economic Committee's Democratic minority. Higher prices for other goods and services, from airline fees to higher mortgage rates, could also weigh on household finances.
Rising prices could pressure household budgets and derail consumer spending if Americans pull back on discretionary purchases, Federal Reserve Bank of Chicago President Austan Goolsbee told CBS News earlier this month. Because consumer spending accounts for about 70 cents of every $1 of GDP, a hit to household finances could ripple through the economy.
"It adds up"
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Even before the Iran war, some consumers were showing signs of financial distress, said Elizabeth Pancotti, managing director of policy and advocacy at Groundwork Collaborative, a left-leaning think tank. Hardship withdrawals from 401(k)s reached a record last year, while loan delinquency rates even among higher-income households rose in 2025.
"We had started to see credit delinquencies increase. We had started to see savings rates go down. We have seen wage growth really stagnate," Pancotti told CBS News. "If you pile on to that, I think you go from flashing warning signs to major flashing alarm bells."
Businesses are also feeling the impact of higher energy prices, as well as disruptions to other key supplies shipped through the Strait of Hormuz. While about 20% of global energy supplies travel through the vital waterway, other commodities — including helium, aluminum and fertilizer — also pass through the strait.
"Every single thing going in and out of a ranch comes in on freight, and so when freight costs are up, shipping cattle goes up, shipping feed goes up," said Andrew Coppin, CEO of Ranchbot, a Fort Worth, Texas-based company that sells water-monitoring technology to ranchers. "And now you've got a dearth of fertilizer availability, and the cost of fertilizer is going up."
The average rancher drives about 1,000 miles a week to check on their cattle, Coppin noted. "It adds up, and at a time when they just didn't need it," he said, adding that he expects the price of beef to rise this year due to the higher costs facing ranchers.
What's up with interest rates?
Consumers and businesses may not get a break on borrowing costs any time soon. The Federal Reserve will need to grapple with higher inflation, as well as a labor market that has swung from monthly job losses to gains over the past year.
In March, the Fed had penciled in one interest rate cut for 2026, but the expectation of higher inflation this year has caused many economists to scrub that cut from their forecasts.
"The Federal Reserve is on a prolonged pause until the fog of war clears and they can assess the full impacts on the U.S. economy," said Heather Long, chief economist at the Navy Federal Credit Union, in an email.
Minutes released Wednesday of the Fed's March 17-18 meeting, where it held borrowing costs steady, also suggest that some policymakers on the central bank's 19-member interest-rate setting panel think it may become necessary to consider a future rate hike.
If there's one bright spot on inflation, it's that the impact of the Trump administration's tariffs has waned, with the effective tariff rate now at about 8%. That's down from a peak of 21% in April 2025, when the president first announced his wide-ranging tariffs, according to the Yale Budget Lab.
The impact of higher import costs is now waning, Bernard Yaros. lead U.S. economist at Oxford Economics, told CBS News. "Most of the tariff pass-through has occurred."
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Source: “AOL Money”
