Washington. The more than 20 percent monthly increase in gasoline prices – the largest in six decades – caused a sharp spike in inflation in March, creating major challenges in combating inflation.

Consumer prices rose 3.3 percent in March compared to the same month last year, the Labor Department reported Friday. This is a sharp increase from 2.4 percent in February and the largest annual increase since May 2024.

In monthly terms, prices increased 0.9 percent in March compared to February, the largest increase of this type in almost four years.

Between February and March, gasoline prices soared 21.2 percent, a rise not seen since 1967, indicates the report that offers the first inflation reading that captures the effects of the war with Iran.

Gasoline prices averaged $4.15 a gallon nationally on Friday, up from $2.98 the day before the war began, an increase of nearly 40 percent, according to the AAA automobile club.

Rising gasoline prices strain the budgets of low- and middle-income households as it erodes their wages, making it difficult to pay for other necessities like food and rent.

The shock to fuel prices stemming from the war with Iran has changed the trajectory of inflation from a slow, gradual decline to a sharp rise that pushes it further away from the Federal Reserve’s 2 percent target.

Excluding the volatile food and energy categories, core prices rose 2.6 percent in March from a year ago and up from 2.5 percent in February.

Industries that depend on oil and gasoline are spending more, particularly airlines, which have passed increases on to travelers. Rates rose 2.7 percent last month and are 14.9 percent higher than a year ago. Various delivery services, such as UPS and FedEx, have already announced increased fuel costs that have raised shipping costs for businesses and households.

Consumer confidence collapses

At the same time, household confidence in the economy plummeted to a record low, with the University of Michigan consumer confidence index falling from 53.3 points in March to 47.6 in early April, largely due to the war with Iran and concerns about rising gasoline prices.

“Many consumers blame the conflict with Iran for unfavorable changes in the economy,” said Joanne Hsu, director of consumer surveys at the university.

A poll conducted last month by The Associated Press-NORC Center for Public Affairs Research found that about six in 10 Republicans are at least “somewhat” worried about being able to pay for gas in the coming months.