US wholesale prices rose sharply in March as the Iran war drove up energy costs, adding to inflation pressures and complicating the Federal Reserve’s policy outlook.Producer prices, which measure inflation at the wholesale level before it reaches consumers, rose 0.5% from February and 4% from March 2025, marking the biggest annual increase in more than three years, AP reported.Energy prices surged 8.5% month-on-month, reflecting the impact of the Middle East conflict on global oil markets.
However, core producer prices –which exclude volatile food and energy components- rose a modest 0.1% from February and 3.8% year-on-year, indicating relatively contained underlying inflation.The rise in wholesale inflation adds to challenges for the US Federal Reserve, which has been under pressure from President Donald Trump to cut interest rates, even as some policymakers lean toward tightening due to persistent price pressures.Food prices, a politically sensitive component ahead of next year’s midterm elections, declined 0.3% in March after rising 2.4% in February.Economists track wholesale inflation closely as it provides early signals on consumer prices, with components such as healthcare and financial services feeding into the Fed’s preferred gauge — the personal consumption expenditures (PCE) index.“The decline in food prices is overdue, and welcome news for everyone,” Carl Weinberg, chief economist at High Frequency Economics, said. “Food price increases are at the core of political arguments over affordability.”The latest data follows a sharp rise in consumer inflation, with gasoline prices pushing the consumer price index up 3.3% year-on-year in March — the biggest increase since May 2024 — and 0.9% month-on-month, the steepest gain in nearly four years.Meanwhile, the International Energy Agency (IEA) warned that the Iran war could lead to an annual decline in global oil demand for the first time since the pandemic.The agency said oil demand is expected to fall by an average of 80,000 barrels per day this year, a sharp reversal from its earlier forecast of an increase of 850,000 barrels per day.The drop in demand has been driven by attacks on energy infrastructure and the shutdown of the Strait of Hormuz, with the IEA projecting a decline of 1.5 million barrels per day in the current quarter.While the initial impact has been concentrated in the Middle East and Asia-Pacific, demand destruction is expected to spread as oil prices rise and supply constraints persist.
