U.S. Inflation Reaccelerates in February as Middle East Conflict Fuels Energy Price Surge

WASHINGTON, March 11 (Reuters) – U.S. inflation reaccelerated in February, data showed on Wednesday, as rising gasoline prices ahead of the Iran conflict and the continued pass-through of Trump-era tariffs added fresh pressure to household budgets and complicated the Federal Reserve's policy outlook.

The Consumer Price Index (CPI) rose 0.3% last month, up from a 0.2% gain in January, according to the Labor Department. Over the past 12 months, inflation climbed 2.4%. The uptick was widely anticipated by economists who pointed to oil markets bracing for war.

"The disinflation progress we saw late last year is hitting a speed bump," said Sarah House, senior economist at Wells Fargo. "Markets were pricing in geopolitical risk well before the first shot was fired, pushing energy costs higher and setting the stage for another increase in March."

Gasoline prices, which had fallen for two consecutive months, rose approximately 0.8% in February. Since the U.S.-Israeli military engagement with Iran began late last month, pump prices have surged over 18% to a national average of $3.54 per gallon, AAA data shows.

The conflict's shadow extends beyond the pump. "A sustained oil price shock doesn't just mean more expensive fill-ups," warned Andy Schneider, senior U.S. economist at BNP Paribas. "It raises fertilizer and transportation costs across the supply chain, posing a clear upside risk to food inflation later this year."

Stripping out volatile food and energy costs, the core CPI rose a more modest 0.2%, helped by falling used car prices and smaller increases in rents and airfares. However, prices for goods like apparel and household furnishings saw solid gains, a sign businesses are increasingly passing on higher input costs from tariffs.

Former President Donald Trump's sweeping tariffs, imposed under a since-invalidated national emergency law, continue to ripple through the economy. Despite a Supreme Court strike-down, a subsequent 10% global tariff—with a threatened increase to 15%—has kept cost pressures simmering.

"The tariff genie is out of the bottle," said Stephen Stanley, chief U.S. economist at Santander. "Input costs continue to escalate even as tariff levels have stabilized. This pass-through dynamic could persist, keeping a floor under goods inflation."

The Fed, which targets the Personal Consumption Expenditures (PCE) price index, is still expected to hold rates steady next week. However, Wednesday's report underscores the fragile and geopolitically sensitive nature of the inflation fight.

Reaction & Analysis:

Michael Torres, small business owner in Ohio: "This is a gut punch. Between gas and the cost of supplies for my shop, my margins are evaporating. The Fed talks about data, but this data means real struggle on Main Street."

Dr. Lena Chen, economics professor at Stanford: "The February data is a textbook example of a supply shock. The core inflation moderation is the more significant trend for the Fed. The key question is whether energy price increases become embedded in inflation expectations."

Janice Harper, retired teacher in Florida: "It's outrageous. We're watching a war drive up the cost of living while politicians argue over tariffs the courts already threw out. It feels like we're just wallets to be drained by global crises and bad policy."

David Park, portfolio manager at Horizon Capital: "The market had priced this in. The focus now shifts to Friday's PCE data. If core PCE remains hot, the 'higher for longer' narrative solidifies, regardless of the Middle East headline noise."

(Reporting by Lucia Mutikani; Editing by Aurora Ellis)