The Iran war "ignites" energy prices, with the US CPI expected to experience the largest month-on-month increase in nearly four years in March.

The U.S. government will announce the Consumer Price Index (CPI) for March on Friday. Multiple forecasts indicate that inflation is accelerating. In the past month, military actions between the U.S. and Israel against Iran have pushed gasoline prices above $4 per gallon, potentially reversing the previous cooling trend in inflation. Economists surveyed by the market expect the overall CPI for March to increase by 3.4% year-on-year, and a 0.9% increase month-on-month, a significant acceleration from the 2.4% year-on-year and 0.3% month-on-month increases in February. If the economists' predictions come true, the month-on-month increase in CPI for March will reach its highest level since June 2022. Market concerns are not only about energy prices: about a third of global shipping of fertilizers must pass through the Strait of Hormuz, which could further increase the already high food costs. Excluding volatile items such as food and energy, the "core" CPI is expected to increase by 0.3% month-on-month and 2.7% year-on-year, a relatively moderate increase. As noted by Bank of America economist Stephen Juneau in a report this week, core inflation "may still be too early to see the impact of the Iran war," and "we will be watching ticket and delivery service prices for early signs of oil price increases penetrating a broader basket of goods." A report released by the Global Research team at Bank of America on April 1 showed that analysts have significantly raised their overall PCE inflation forecasts, with the new forecast path significantly rising compared to before, with the peak expected to occur this quarter (the second quarter of 2026). This revision is directly linked to the bank's commodities team raising its oil price forecast, with the rapid transmission effects of energy prices expected to be concentrated in overall inflation data in the short term. Meanwhile, inflationary pressures are not short-lived. The bank mentioned that even if oil prices fall next year, overall inflation levels are expected to be about 50 basis points higher than previously predicted. Disruptions in the supply chain are also seen as a core variable for the sustainability of inflation. The report points out that disruptions in fertilizer supply are sticky and will continue to push up food prices. At the same time, global supply chain issues have not been fundamentally resolved, and their impact on price levels will continue until 2027. In addition, tariff factors continue to push up prices. Goldman Sachs economists Jessica Rindels and Ronnie Walker wrote in a report this week that tariffs are expected to "moderately increase monthly inflation in the coming months," affecting categories such as entertainment goods and home decor.