Gasoline prices surged in April, raising the CPI and pressuring household budgets.

Iran War Drove Up Inflation To the Highest Since 2023

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.

Learn about our editorial policies

Updated May 12, 2026

10:04 AM EDT

Shell gas station price display at night showing prices for Regular Plus and VPower gasoline

High gas prices are displayed at a Shell gas station on May 11, 2026 in Burbank, California. Mario Tama / Getty Images

Inflation rose 3.8% over 12 months in April, the highest since May 2023 and in line with forecasts.
The Iran war has sent gas prices soaring, pushing up the overall inflation rate.
"Core" inflation outside of food and gas prices rose 2.8% over the year, slightly higher than the forecast for a 2.7% annual increase.

Get personalized, AI-powered answers built on 27+ years of trusted expertise.

Inflation is making an unwelcome comeback because of the Iran war.

The cost of living as measured by the Consumer Price Index rose 3.8% over the year in April, up from a 3.3% increase in March, the Bureau of Labor Statistics said Tuesday.1 The increase was the highest since May 2023 and was mainly due to a surge in energy prices driven by the Iran war, which restricted oil supplies. Gasoline rose 5.4% in April alone and was 28.4% higher over 12 months, the bureau said.

What This Means For the Economy

The uptick of inflation puts pressure on consumer spending, with gasoline eating up more of household budgets. It also will discourage the Federal Reserve from cutting interest rates.

The jump in consumer prices put further pressure on household budgets, which have been squeezed by steeper-than-usual price hikes since the pandemic. Over the last 12 months, price hikes have outpaced pay raises, leaving hourly pay with 0.3% less buying power. That was the first drop in buying power since April 2024, and the largest since 2023, according to data from the bureau.2 It's also a setback for the Federal Reserve's efforts to wrestle inflation down to a 2% annual rate, which hasn't happened since 2021.

"There is a real financial squeeze underway," Heather Long, chief economist at Navy Federal Credit Union, wrote in a commentary. "For the first time in three years, inflation is eating up all wage gains. This is a setback for middle-class and lower-income households and they know it. They are having to cut back on spending and stretch every dollar.”

Related Education

[Inflation: What It Is and How to Control Inflation Rates

](https://www.investopedia.com/terms/i/inflation.asp) [What Is the Consumer Price Index (CPI)?

CPI ](https://www.investopedia.com/terms/c/consumerpriceindex.asp)

"Core" prices excluding food and energy rose 2.8% over 12 months, higher than the 2.7% forecasters had expected, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.3

Economists and officials at the Federal Reserve use core prices as a better guide to inflation's trajectory, since food and energy costs can swing up and down quickly for reasons unrelated to broader inflation trends. However, core prices are affected by fuel prices, as higher transportation costs are passed on to customers.

"This data only includes the first signs of broader spillover from the oil price shock into core components, and annual inflation is set to move higher in May, which will leave the Fed on the sidelines until there are signs of oil prices heading sustainably lower," Katherine Judge, senior economist at CIBC, wrote in a commentary.

Update, May 12, 2026—This article has been updated after publication with more detail on prices, a comparison with wage gains, and commentary from economists.

Do you have a news tip for Investopedia reporters? Please email us at

tips@investopedia.com

Get personalized, AI-powered answers built on 27+ years of trusted expertise.

Sponsored

Compete Risk Free with $100,000 in Virtual Cash

Put your trading skills to the test with our
[FREE Stock Simulator.](https://adclick.g.doubleclick.net/pcs/click?xai=AKAOjsvfWjM0tr4BD7vGXHvfP47E_9AaLnBeA6c1CVN3NEt-aUW11_eynvBA3AI-uqFSNjuWIGyHVXKeZRJeM5QZhyex9lTpOw5z-G44w1-p2pIX_dkOhYhu_s5J03Qu6PdjukxYFusFyc1rZ-oUA9kiHCECCpCy_Ur8DWR18-fCXrwGEYER-hqKzvi7BfDPmuMKnEzRo3AVADQWhsSfBQ62vmnwki3sWU0qJBsKK46PpgVqOjuaqBIeEchHJ41aW1IXte9suM9_tWshSCii6s8xnkO4Y_H4jOqyyCvsOa2oxeVZT4Vly6vMeqnAODimwyIcq-F-Tmc1ettjc43lDWnyQoqRbz-LXKFXSepQzRiiePVctlSUQ7qgE0KTaZ2nYeh80O5R8TRU_dsehxyBWHQpk9LHUMfnYyzoj4NIJBgaGVG57M5qaDr8&sai=AMfl-YR06GEEjM8TgGu6y-XBDPS2YrKTifQcx4iBeKHOBIQ3B5eVqhBDRve6T960V_skhbzS6ZQQY-LxSjG_GAhfZYRZSH6SCIDNgqWNfBcz96Mp4wpAOCTLROAJ-Vl9n0VITyNBFIzoqy4B7PdcdDFNJctsB56HeLyNr0YYIpMGAh4dSbpsiPJBK5sKfDQcdDjTrl3zwA36GoZHJb6Vvs8ODpyI2ahk4K8wRrhOemv4ZpdZlIwUgN_-AcHZ0KpejNifgkb76BzWfXudng_59ZopRiH7MZbW8tjXio7bgHc2Bo5veIOFCZzP8Ih2pIFgi-lbtP_6TUrNH9tWxl5nYdvPup0f4XG7hdDLHMdS3yXnM6SJrtIhDOc-jJXsqEaIDKBsw4o0yHnD9KyRKrWIywToXhdDiNO3Pw6qukmzlS1OS0lsFckAAwOGlieGILXoVYDFobM_3ECmlZn6QPUlpUabQtKDhnxunKM&sig=Cg0ArKJSzKmiQj3do7XJEAE&fbs_aeid=%5Bgw_fbsaeid%5D&urlfix=1&adurl=http://www.investopedia.com/simulator/?source=dfp-ros-sim&subid=dfp-ros-sim)
Compete with thousands of Investopedia traders and trade your way to the top! Submit trades in a virtual environment before you start risking your own money.
[Practice trading strategies](https://adclick.g.doubleclick.net/pcs/click?xai=AKAOjsvfWjM0tr4BD7vGXHvfP47E_9AaLnBeA6c1CVN3NEt-aUW11_eynvBA3AI-uqFSNjuWIGyHVXKeZRJeM5QZhyex9lTpOw5z-G44w1-p2pIX_dkOhYhu_s5J03Qu6PdjukxYFusFyc1rZ-oUA9kiHCECCpCy_Ur8DWR18-fCXrwGEYER-hqKzvi7BfDPmuMKnEzRo3AVADQWhsSfBQ62vmnwki3sWU0qJBsKK46PpgVqOjuaqBIeEchHJ41aW1IXte9suM9_tWshSCii6s8xnkO4Y_H4jOqyyCvsOa2oxeVZT4Vly6vMeqnAODimwyIcq-F-Tmc1ettjc43lDWnyQoqRbz-LXKFXSepQzRiiePVctlSUQ7qgE0KTaZ2nYeh80O5R8TRU_dsehxyBWHQpk9LHUMfnYyzoj4NIJBgaGVG57M5qaDr8&sai=AMfl-YR06GEEjM8TgGu6y-XBDPS2YrKTifQcx4iBeKHOBIQ3B5eVqhBDRve6T960V_skhbzS6ZQQY-LxSjG_GAhfZYRZSH6SCIDNgqWNfBcz96Mp4wpAOCTLROAJ-Vl9n0VITyNBFIzoqy4B7PdcdDFNJctsB56HeLyNr0YYIpMGAh4dSbpsiPJBK5sKfDQcdDjTrl3zwA36GoZHJb6Vvs8ODpyI2ahk4K8wRrhOemv4ZpdZlIwUgN_-AcHZ0KpejNifgkb76BzWfXudng_59ZopRiH7MZbW8tjXio7bgHc2Bo5veIOFCZzP8Ih2pIFgi-lbtP_6TUrNH9tWxl5nYdvPup0f4XG7hdDLHMdS3yXnM6SJrtIhDOc-jJXsqEaIDKBsw4o0yHnD9KyRKrWIywToXhdDiNO3Pw6qukmzlS1OS0lsFckAAwOGlieGILXoVYDFobM_3ECmlZn6QPUlpUabQtKDhnxunKM&sig=Cg0ArKJSzKmiQj3do7XJEAE&fbs_aeid=%5Bgw_fbsaeid%5D&urlfix=1&adurl=http://www.investopedia.com/simulator/?source=dfp-ros-sim&subid=dfp-ros-sim)
 so that when you're ready to enter the real market, you've had the practice you need.
[Try our Stock Simulator today >>](https://adclick.g.doubleclick.net/pcs/click?xai=AKAOjsvfWjM0tr4BD7vGXHvfP47E_9AaLnBeA6c1CVN3NEt-aUW11_eynvBA3AI-uqFSNjuWIGyHVXKeZRJeM5QZhyex9lTpOw5z-G44w1-p2pIX_dkOhYhu_s5J03Qu6PdjukxYFusFyc1rZ-oUA9kiHCECCpCy_Ur8DWR18-fCXrwGEYER-hqKzvi7BfDPmuMKnEzRo3AVADQWhsSfBQ62vmnwki3sWU0qJBsKK46PpgVqOjuaqBIeEchHJ41aW1IXte9suM9_tWshSCii6s8xnkO4Y_H4jOqyyCvsOa2oxeVZT4Vly6vMeqnAODimwyIcq-F-Tmc1ettjc43lDWnyQoqRbz-LXKFXSepQzRiiePVctlSUQ7qgE0KTaZ2nYeh80O5R8TRU_dsehxyBWHQpk9LHUMfnYyzoj4NIJBgaGVG57M5qaDr8&sai=AMfl-YR06GEEjM8TgGu6y-XBDPS2YrKTifQcx4iBeKHOBIQ3B5eVqhBDRve6T960V_skhbzS6ZQQY-LxSjG_GAhfZYRZSH6SCIDNgqWNfBcz96Mp4wpAOCTLROAJ-Vl9n0VITyNBFIzoqy4B7PdcdDFNJctsB56HeLyNr0YYIpMGAh4dSbpsiPJBK5sKfDQcdDjTrl3zwA36GoZHJb6Vvs8ODpyI2ahk4K8wRrhOemv4ZpdZlIwUgN_-AcHZ0KpejNifgkb76BzWfXudng_59ZopRiH7MZbW8tjXio7bgHc2Bo5veIOFCZzP8Ih2pIFgi-lbtP_6TUrNH9tWxl5nYdvPup0f4XG7hdDLHMdS3yXnM6SJrtIhDOc-jJXsqEaIDKBsw4o0yHnD9KyRKrWIywToXhdDiNO3Pw6qukmzlS1OS0lsFckAAwOGlieGILXoVYDFobM_3ECmlZn6QPUlpUabQtKDhnxunKM&sig=Cg0ArKJSzKmiQj3do7XJEAE&fbs_aeid=%5Bgw_fbsaeid%5D&urlfix=1&adurl=http://www.investopedia.com/simulator/?source=dfp-ros-sim&subid=dfp-ros-sim)

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.