Trump’s War in Iran Hits Pockets at Home as Inflation Spikes

Today’s Consumer Price Index (CPI) report shows prices surged 3.3% over the past year in March. Prices jumped by 0.9% in the past month alone. The spike in prices was largely driven by the energy price shock from Trump’s war with Iran, which has skyrocketed oil prices and pushed gasoline above $4 per gallon. This report is the first full snapshot of inflation since the onset of the conflict. Even with a two-week ceasefire in place, global supply chains are still disrupted and the inflationary shockwaves will continue to hit Americans’ wallets for months to come.

Groundwork Collaborative's Managing Director of Policy and Advocacy Elizabeth Pancotti shared her reaction:

“Today’s inflation report comes as no shock to anyone who has filled up their gas tank in the past month. The toll of Trump’s war in Iran won’t stop at the pump – price hikes on summer vacations, groceries, and electronics are coming down the pike as his war stokes chaos in supply chains around the world. By pursuing this illegal war, the president has made it clear that he’s putting American families last.”

BACKGROUND

Rising energy prices are driving the spike in inflation. Energy prices in March surged 12.5% over the past year and 10.9% in March alone. Gasoline prices have risen from just under $3 before the conflict to over $4 a gallon, and diesel has climbed more than 50% to $5.68, just 13 cents below its record-high in June 2022. Rising gasoline prices accounted for nearly three-fourths of the increase in headline inflation last month.

The fallout of Trump’s agenda doesn’t stop at the gas pump. Core CPI, which excludes food and energy, rose 2.6% over the past year, up from 2.5%, and 0.2% over the past month.

• There were big monthly price jumps in computer software and accessories (4%) and airline fares (2.7%).
• Following the Supreme Court’s ruling against his IEEPA tariffs, Trump imposed a 10% global tariff, blocking any relief for American families. In the past month alone, the price of items primarily imported, like clothing and toys, rose by more than 2%.
• Persistent inflation also continues in key service categories, with health care services up 3.7% and housing prices rising 3% over the past year. Instead of offering American families relief, Trump proposed eliminating more than $8 billion in funding for housing and utility affordability in his FY27 budget last week.

The fragile ceasefire can’t reverse the damage that is already done. Even if the conflict was fully resolved and traffic through the Strait of Hormuz resumed without disruptions, prices would continue to rise in the months to come as higher input costs pass through to consumers. Steel, aluminum, plastics, and fertilizer prices have all spiked, and this rise in input costs is still working through supply chains.

• If the ceasefire holds, KPMG expects inflation to stay elevated in the months ahead, as energy prices remain high before gradually easing. If the war drags on, inflation pressures intensify and persist, with higher oil prices prolonging the cost-of-living squeeze and weakening the broader economy.
• The Federal Reserve has even warned that if the conflict continues, it would lead to more sustained energy shocks that are likely to feed into broader inflation in the months ahead.