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The armed conflict between the United States and Iran has driven U.S. inflation to its highest level in nearly three years, according to data from the Commerce Department released this Thursday, which shows how the blockade of the Strait of Hormuz affects the economy of American households.
Iran blocked the Strait of Hormuz on March 4, 2026, through which 20% of the world's oil and liquefied natural gas passes, leading to an immediate energy shock.
The price of Brent crude surpassed 102 dollars after being around 70 dollars just days earlier, and the national average price of gasoline jumped from 2.98 to 4.17 dollars per gallon in just a few weeks.
The PCE inflation indicator —the one favored by the Federal Reserve— rose by 0.7% in March compared to February, reaching a 3.5% year-over-year, the largest increase in nearly three years.
Excluding food and energy, the core inflation rose by 3.2% annually in March, surpassing the 3% recorded in February, which further distances prices from the 2% target set by the Fed.
The impact is not limited to fuel. Residential electricity, heating oil —which increased by 41%— and health insurance, which rose by 21% on average to reach 752 dollars per month, are straining household budgets from multiple fronts.
The additional spending on gasoline between the end of February and March totaled 8.4 billion dollars for households, about 740 dollars per household on average. In areas like Miami Beach, the price of a gallon exceeded 5.39 dollars.
In this context, the U.S. economy grew by 2% in the first quarter of 2026, recovering from the weak 0.5% in the fourth quarter of 2025, which was affected by a 43-day federal government shutdown. However, the figure fell below analysts' expectations, who had projected between 2.2% and 2.3%.
Consumer spending—which represents 70% of economic activity—slowed to 1.6%, while business investment grew by 8.7%, largely driven by artificial intelligence projects.
The war against Iran has cost the U.S. Treasury at least $25 billion since the beginning of Operation Epic Fury on February 28, 2026, according to the Pentagon.
The Federal Reserve left its benchmark interest rate unchanged at a range of 3.5%-3.75% last Wednesday, citing "a high level of uncertainty" stemming from the conflict, and ruling out any cuts for the time being.
The chief economist of High Frequency Economics, Carl Weinberg, summarized the magnitude of the problem: "President Trump's war against Iran has resulted in a total blockade of the Strait of Hormuz. We do not know how to model the impact of this event, as we have never seen anything like it."
The economic discomfort is reflected in the surveys: only 32% of Americans approve of Trump's management in the face of inflation, while 68% disapprove.
Gregory Daco of EY-Parthenon projects that the conflict will subtract 0.3 percentage points from the annual GDP in 2026, bringing the estimated growth down to just 1.8%.
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