Consumer prices jumped to an annual rate of 3.7% in September, up from 3.4% in August, according to the Bureau of Labor Statistics. Core inflation, which excludes volatile food and energy costs, accelerated to 2.6% from 2.4%, further above the Federal Reserve's 2% target.

Higher gasoline prices drove much of the monthly increase. Gas prices rose 9.1% in September alone and have climbed 34% over the past year, reaching an average of $4.33 per gallon on Wednesday, according to AAA data. The Iran war, which began in late February when the U.S. and Israel launched strikes, has restricted oil supplies flowing through the Strait of Hormuz and damaged regional refining infrastructure.

Diesel prices have surged even more sharply, up 68% since before the war to $6.30 per gallon. Because trucks, trains, ships and manufacturers rely on diesel for operations, those higher costs will likely ripple through consumer prices over the next few months as transportation and production expenses increase. Airline fares have already risen 22% over the past year, driven partly by elevated jet fuel costs.

Mark Zandi, chief economist at Moody's Analytics, said inflation remains "uncomfortably strong" and that "the war's fingerprints are all over the report." Michael Reid, head of U.S. economics at the Royal Bank of Canada, characterized current inflation as an "oil story" that will persist for several more months. Wells Fargo Investment Institute analysis suggests energy prices may not decline until mid-2027 due to lost refining capacity and distribution problems.

The inflation data arrives less than a month before midterm elections, where affordability ranks as a primary voter concern. Consumer sentiment has plunged to multiyear lows. The University of Michigan's sentiment index hit its second-lowest reading on record in September, with director Joanne Hsu noting consumers across the political spectrum believe the economy has weakened since the start of the year.

Economists expect the Federal Reserve may raise interest rates between now and spring 2027 to combat persistent inflation. The Social Security Administration announced a 3.6% cost-of-living adjustment for benefits in 2027, though an AARP survey found 76% of respondents said a 3.5% increase would prove insufficient.