U.S. Wholesale Prices Surged 4% Last Month After The War In Iran Sent Energy Prices Soaring
WASHINGTON (AP) — U.S. wholesale prices rose last month as the Iran war drove up costs energy.
The producer price index, which measures inflation before it reaches consumers, rose 0.5% from February and 4% from March 2025, the Labor Department reported Tuesday. The year-on-year increase was the largest in more than three years. Energy prices increased by 8.5% compared to February.
Excluding volatile food and energy prices, so-called core producer prices increased modestly by 0.1% compared to February and 3.8% compared to the previous year. The increases in wholesale prices were smaller than economists had predicted.
The rise in prices is complicating the job of inflation warriors at the Federal Reserve, who face intense pressure from President Donald Trump to lower benchmark interest rates. But some Fed policymakers tend to raise interest rates instead, as higher energy costs increase the threat of inflation.
Food prices, which will certainly be at the forefront of next year’s midterm elections, fell 0.3 percent in March after rising 2.4 percent in the previous month.
Wholesale prices can offer an early look at where consumer inflation might be heading. Economists are watching it, too, because some of its components, particularly measures of health care and financial services, flow into the personal consumption expenditures, or PCE, price index, the Fed’s preferred inflation gauge.
Carl Weinberg, chief economist at High Frequency Economics, wrote that the recent peak of inflation in the United States confirms the Federal Reserve’s recent shift to focus on rising costs.
“The decline in food prices is about time, and that’s welcome news for everyone,” Weinberg said Tuesday. “Food price increases are at the center of political debates about affordability.”
The Department of Labor reported last week: Rising gasoline prices increased consumer prices by 3.3% Last month, this was the largest annual increase since May 2024, compared to a year ago. Compared to February, consumer prices in March increased by 0.9%, the largest increase in nearly four years.
The war in Iran and rising energy prices will lead to an annual decline in oil demand for the first time since the pandemic as billions of people struggle to live in isolation, the International Energy Agency predicted Tuesday.
The agency, established after the 1974 oil crisis, said oil demand was expected to fall by an average of 80,000 barrels per day this year, a sharp revision from the 850,000 barrel per day increase predicted before the war began.
The decline in March was particularly severe due to attacks on energy infrastructure and the closure of the Strait of Hormuz, according to the IEA, which expects a 1.5 million barrel drop in demand this quarter.
Treasury Secretary Scott Bessent told reporters on Tuesday that “a few weeks of minor economic pain is worth eliminating the incalculable tail risk of a nuclear Iran or a nuclear Iran using this weapon.”
“So the conflict will end, prices will come down, and then headline inflation will come down, and gasoline prices will come down with it,” Bessent said. “We have seen them step back in the last 10 days.”
The average price of a gallon of regular gasoline in the U.S. has dropped about 3 cents in that time period, but remains well above $4 per gallon, costing about 30% more per gallon than this time last year.
And the conflict has no definitive end date. Washington enacted Blockade of Iranian ports This week, Tehran threatened to strike targets in the region. Diplomats continued efforts to organize Tuesday new round of peace talks Between the USA and Iran.
AP reporters Michelle Chapman in New York City and Fatima Hussein in Washington contributed to this report.
