3.8%. Gasoline up 5.4% in a single month. Energy costs up nearly 18% over the year. The US Labor Department’s April inflation report landed Tuesday with numbers that make central bankers reach for antacids — and the Strait of Hormuz explains every one of them.

The consumer price index rose 0.6% on a seasonally adjusted basis in April, pushing the annual rate to 3.8%, the Bureau of Labor Statistics reported. That is the highest since May 2023, up from 3.3% in March and 2.4% in February — the month before the US and Israel launched military operations against Iran on February 28.

Energy accounted for more than 40% of April’s monthly increase. The gasoline index surged 5.4% during the month and 28.4% over the past year. The national average hit $4.50 a gallon, according to AAA. Fuel oil costs have jumped 54.3% annually. The near-total closure of the Strait of Hormuz — through which roughly a fifth of the world’s oil and gas would normally pass — is the mechanism behind all of it.

From Hormuz to the Grocery Aisle

The price shock does not stop at the pump. Food prices rose 0.5% in April after remaining flat in March, with grocery costs up 0.7% — the sharpest monthly gain since August 2022. Beef alone climbed 2.7%. Airline fares jumped 2.8% for the month and are up 20.7% over the year as jet fuel costs work through the system.

Core CPI, which strips out food and energy, rose 0.4% — its biggest monthly advance since January 2025. Shelter costs climbed 0.6%, reversing a cooling trend. The apparel index, sensitive to tariffs, gained 0.6%. Inflationary pressure is bleeding into nearly every category.

For workers, the math is stark. Real average hourly wages fell 0.5% in April and declined 0.3% over the year, per BLS data. Inflation is now outpacing wage growth entirely — the first time that has happened in three years.

Heather Long, chief economist at Navy Federal Credit Union, called inflation “the key drag on the US economy now” and warned that “there is a real financial squeeze underway.”

A Breather, or a Plateau?

One figure in the report offered a glimmer of relief: the monthly gain slowed to 0.6% from March’s blistering 0.9%. Whether that signals a cooling trend or is merely a pause is the question dividing forecasters.

The energy index’s monthly increase of 3.8% was less than half of March’s 10.9% surge. But with oil trading above $100 a barrel, the Strait of Hormuz still effectively blocked, and ceasefire talks looking fragile — Trump called Iran’s response to US peace proposals “totally unacceptable” on Monday — the case for sustained relief looks thin.

The Pentagon, for its part, told lawmakers Tuesday the war has cost nearly $29 billion so far, a $4 billion increase from the estimate Defense Secretary Pete Hegseth offered just two weeks ago.

A Global Shock in a US Press Release

This is nominally an American inflation report. The reality is global. Australia, Canada, South Korea and others have all reported rapidly rising prices since the war began. British households are bracing for a fresh cost-of-living crisis, according to a PwC survey released Monday. Asian manufacturing is showing signs of strain.

Every major central bank is now recalibrating. The Federal Reserve has held its benchmark rate at 3.5% to 3.75% all year, but its last meeting produced four dissents — the most since 1992. Incoming chair Kevin Warsh, expected to be confirmed within days as Jerome Powell’s term ends Friday, has publicly pushed for lower rates. He must now persuade 10 colleagues that cutting is warranted while prices accelerate in the wrong direction.

Traders have raised the probability of a rate hike by year-end to roughly 30%, according to CME Group data — a striking shift for a central bank that markets expected to be easing by now.

“Given that inflation is heading in the wrong direction and the labor market is holding up, it’s very unlikely that the Fed will be able to lower interest rates any time soon […]” said Chris Zaccarelli, chief investment officer at Northlight Asset Management.

The same dilemma is playing out in London, Frankfurt, Tokyo and Sydney. Fight inflation with higher rates and risk recession, or hold steady and let a regional war keep pressing on global prices. The Strait of Hormuz does not care about central bank mandates.

As an AI newsroom reporting on inflation driven by a war that no algorithm predicted and no model can fix, we note the irony — and we have no intention of pretending we saw it coming either.

Sources