The Iran war is driving up wholesale costs for businesses, and consumers are likely to foot the bill sooner or later.

Feeling the Budget Squeeze? How a Surprising Rise in Producer Costs Could Make It Even Worse

Diccon Hyatt

Full Bio Diccon Hyatt is an experienced financial and economics reporter. He's written hundreds of articles breaking down complex financial topics in plain language, emphasizing the impact that economic currents would have on individuals' finances and the market. He has a Bachelor's degree in English from the University of Delaware.

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Published May 13, 2026

11:16 AM EDT

Grass Lake, Michigan, A farmer applies liquid fertilizer to a farm field in early spring.

The war in Iran and the blockage of the Strait of Hormuz have dramatically raised the price of fertilizer and the cost of diesel fuel used in farming. Jim West / UCG / Universal Images Group via Getty Images

Key Takeaways

The unexpectedly high increase in the Producer Price Index in April signals inflation is heating up.
Prices rose steeply for all kinds of products, not just fuel.
Businesses are likely to pass along soaring wholesale costs to consumers as fuel price hikes spill over.

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The Iran war is driving up wholesale costs for businesses, and consumers are likely to foot the bill sooner or later.

The Producer Price Index for final demand, a measure of wholesale prices, rose 1.4% in April alone and 6% over the last 12 months, the Bureau of Labor Statistics said Wednesday.1 That was the biggest monthly increase since March 2022 and the largest annual increase since December 2022.

The monthly increase was nearly triple the 0.5% rise that forecasters had expected, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.2 Excluding the volatile prices for food, energy, and trade services, wholesale inflation rose 0.6% over the month, double the expected increase.

What This Means For The Economy

The jump in wholesale prices signals consumer inflation is building, and the Federal Reserve will likely be reluctant to cut interest rates anytime soon.

The echoes of 2022 are ominous because wholesale prices are a leading indicator of consumer inflation. The last time the PPI jumped this much, consumer inflation spiked to its highest in a generation.

Economists don't yet expect inflation to surge back to double digits, but consumers should brace for accelerating price increases. And the uptick adds to recent evidence that the war-related fuel price hikes are sending an inflation shockwave through the economy, pushing up prices for all kinds of other items.

"Look for another heated consumer inflation report in May, and not solely due to costlier gasoline, as price pressures stemming from the Iran war are bleeding into other sectors of the economy," Sal Guatieri, senior economist at BMO Capital Markets, wrote in a commentary.

Related Education

[Producer Price Index (PPI): What It Is and How It's Calculated

Producer Price Index (PPI) ](https://www.investopedia.com/terms/p/ppi.asp) [CPI vs. PPI: Key Differences in Inflation Measurement

A man works in a manufacturing plant. ](https://www.investopedia.com/ask/answers/011915/what-difference-between-consumer-price-index-cpi-and-producer-price-index-ppi.asp)

The widespread nature of the price increases highlighted that the supply chain disruptions from the conflict in the Middle East go far beyond oil. The Strait of Hormuz between Iran and Oman has been closed to ship traffic since the war began, cutting off a crucial trade route that carries 20% of the world's oil supply as well as fertilizer, aluminum, and other resources.

"Not only oil, but metals commodities, fertilizers and plastics are all directly impacted—or compounded by—the military conflict in Iran, promising higher inflation for producer costs for the foreseeable future," Kurt Rankin, senior economist at PNC, wrote in a commentary.

The latest supply chain disruption is likely to translate into higher consumer prices, similar to when COVID-19 shutdowns rippled through the global economy. Based on the wholesale price hikes, forecasters at Nationwide expect the Consumer Price Index to rise 4% over the year in May, up from a 3.8% jump in April, which would be a fresh high since 2023.

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