Inflation rose for the second straight month as the Iran war hiked gas prices.

A motorist fills up the tank of a vehicle at a gas station, SMay 24, 2026, in Sheridan, Colo.

A motorist fills up the tank of a vehicle at a gas station, SMay 24, 2026, in Sheridan, Colo.

A motorist fills up the tank of a vehicle at a gas station, SMay 24, 2026, in Sheridan, Colo.

A motorist fills up the tank of a vehicle at a gas station, SMay 24, 2026, in Sheridan, Colo.

Inflation jumped for a second consecutive month in April as the Iran war drove up gasoline prices and strained household budgets, government data on Thursday showed.

Prices rose 3.8% in April compared to a year earlier, according to the Personal Consumption Expenditures (PCE) Index, an inflation gauge preferred by the Federal Reserve. The PCE stood at 2.8% as recently as February.

Inflation now stands at its highest level since May 2023, the Commerce Department report showed.

The savings rate, meanwhile, fell to 2.6%, its lowest level since 2022, suggesting some strapped consumers are struggling to stash away extra funds.

A persistent increase in consumer prices may put pressure on the Fed to raise interest rates as a means of dialing back inflation. The latest reading comes days after Fed Chair Kevin Warsh began a four-year term atop the central bank.

For now, futures markets overwhelmingly expect the Fed to hold interest rates steady when policy makers meet next month, according to the CME FedWatch Tool, a measure of investor sentiment.

Meat is displayed at a grocery store in Dallas, April 15, 2026. Lm Otero/AP

However, markets peg the chances of a quarter-point rate increase by the end of the year at more than one in three, well above where odds of a rate hike stood prior to the war, the tool shows.

The benchmark interest rate stands at a level between 3.5% and 3.75%. That figure marks a significant drop from a recent peak attained in 2023, but borrowing costs remain well above a 0% rate established at the outset of the COVID-19 pandemic.

The Middle East conflict prompted the Iranian closure of the Strait of Hormuz, a maritime trading route that facilitates the transport of about one-fifth of global oil supply. The standoff triggered one of the largest oil shocks ever recorded.

As a result, gasoline prices surged. The price of an average gallon of gas stood at $4.42 as of Thursday, AAA data showed – an increase of $1.44 per gallon since the war began on Feb. 28. That amounts to a 48% price jump in about three months.