New U.S. government data reveals a significant acceleration in inflation, largely fueled by rising energy costs following the onset of military conflict with Iran. The Consumer Price Index rose 3.3% over the past 12 months ending in March, marking the highest annual rate in nearly a year, according to the Bureau of Labor Statistics. The monthly increase of 0.9% was led by a 10.9% jump in overall energy prices, with gasoline costs alone surging 21.2%.
Lack of Pre-War Economic Planning
Concurrently, a senior adviser to the U.S. Treasury Department has admitted the agency conducted no analysis of the potential economic fallout before the conflict began. Sriprakash Kothari, adviser to Treasury Secretary Scott Bessent and a nominee for assistant secretary for economic policy, disclosed this in closed-door discussions with staff for Senator Ron Wyden (D-Ore.), the top Democrat on the Senate Finance Committee.
In a letter to Secretary Bessent, Wyden wrote that Kothari stated he "had not performed any analysis or work related to energy markets, or any other economic facet, in the lead-up to military action in Iran." Kothari further indicated he was not aware of anyone at Treasury who had performed such preparatory work, beginning his own analysis only after learning of the February 28 strikes from news reports.
"It is unacceptable that Treasury may not have performed the most basic planning before it was launched," Wyden wrote, citing the "rapidly growing affordability crisis" intensified by the war.
Wyden emphasized that the consequences were predictable, noting intelligence agencies had previously assessed Iran's capability to disrupt energy supplies through the Strait of Hormuz. The conflict has already cost U.S. taxpayers over $30 billion, with drivers spending an additional $8 billion on gasoline in its first month.
Economic Analysts Point to Direct War Impact
Economists directly linked the inflation data to the conflict. University of Michigan economist Justin Wolfers described the figures as "the first numbers showing economic effects of the war in Iran." The New York Times economics reporter Ben Casselman observed the 3.3% rate was the fastest of the current presidential term and was "driven almost entirely by higher energy prices, the direct result of the war with Iran."
Heather Long, chief economist at Navy Federal Credit Union, highlighted a concerning compression of real wages. "Wage growth was +3.5% in March for the past 12 months. Inflation was +3.3%... This is the squeeze many households are feeling," she explained. Elizabeth Pancotti of the Groundwork Collaborative predicted broader supply chain effects. "Price hikes on summer vacations, groceries, and electronics are coming down the pike as his war stokes chaos in supply chains around the world," she said.
Asian and Global Repercussions
The economic shockwaves from the conflict and the disruption to Strait of Hormuz shipping have significant implications for Asia, a region heavily dependent on energy imports. The price surge and supply concerns directly impact major economies like China, India, Japan, and South Korea, which rely on stable energy markets for growth. The situation adds a complex layer to international diplomacy, including ahead of any potential Trump-Xi summit.
Reports suggest the administration underestimated Iran's response, a miscalculation with global economic consequences. As noted in related coverage, the Iran conflict has trapped the Trump administration just as Asian economies face this energy shock. Furthermore, the administration's approach has faced international pushback, with NATO allies rejecting Trump's Hormuz blockade as oil prices climbed.
The Republican Party attempted to highlight a lower-than-expected rise in "core" inflation, which excludes food and energy. However, this argument gained little traction with consumers facing national average gasoline prices of $4.15 per gallon, underscoring the direct and palpable economic impact of the foreign policy decision.
