Iran War Sends Gas Prices Higher, Lifting U.S. Inflation To 3.8% Annually

The April Consumer Price Index reveals that inflation is rising, influenced by oil supply shocks from the Iran war. Month-over-month inflation was 0.6% in April, following 0.9% in March, numbers last seen during 2022's 40-year high. Annual inflation reached 3.8% in April, with core inflation (excluding food and energy) at 2.8%. While not as high as 2022, this is moving away from the Federal Reserve's healthy 2% target. Oil shocks are a major driver, with energy prices up 18% and gas over 28% in the past year. This impacts consumer spending beyond fuel, with airfares increasing almost 21% due to fuel costs. Food prices are up over 3%, with fruits and vegetables rising over 6%, likely due to higher fuel and fertilizer costs from war-related shipping disruptions. Tomatoes, 70% imported by the US, are up almost 40% due to tariffs. Some good news for consumers: smartphone prices dropped over 12% and used cars/trucks were down over 2%. The key takeaway is that inflation remains well above the Fed's 2% target, driven by energy and re-accelerating prices in many other areas.