China Inflation Beats Forecasts as Iran War Squeezes Energy Markets

China’s consumer and producer prices both surpassed analyst expectations in April, CNBC reported Monday, as the ongoing conflict in Iran drives global commodity costs sharply higher.

The National Bureau of Statistics confirmed that China’s consumer price index rose 1.2% year-on-year in April. Economists polled by Reuters had forecast a 0.9% gain. That reading accelerated from the 1% increase recorded in March.

Producer Prices Snap a Historic Deflationary Streak

Factory-gate prices delivered an even larger upside surprise. The producer price index climbed 2.8% from a year earlier, more than double the 1.6% consensus estimate and sharply above the 0.5% rebound posted the prior month. The April figure marks the first sustained positive turn in wholesale prices in more than three years, ending what analysts described as the longest deflationary run China had seen in decades.

Economists at Nomura welcomed the reflationary signal but cautioned that supply-side inflation carries risks. Higher input costs could squeeze corporate profit margins and weigh further on already fragile household spending.

Iran War and the Strait of Hormuz Pressure Supply Chains

The three-month-old Iran war has severely restricted tanker traffic through the Strait of Hormuz, rattling global energy markets and lifting commodity prices worldwide. China, the planet’s largest crude importer, has leaned on strategic petroleum reserves and a diversified renewable energy base to absorb part of the shock. Economists warn that buffer has limits if the disruption extends further.

April import data underscored the squeeze. China’s crude purchases fell roughly 20% in volume terms compared with a year earlier, according to figures released over the weekend.

Weak Domestic Demand Complicates the Recovery Picture

Despite the inflation beat, the demand side of China’s economy remains under pressure. Retail sales growth slowed to just 1.7% in March, missing forecasts by a wide margin. The property sector continued to contract, with real estate investment falling 11.2% through March, deepening from a 9.9% decline over the same stretch in 2025.

On trade, China posted an $84.8 billion monthly surplus in April after export volumes grew 14.1% year-on-year. The country’s trade surplus with the United States has reached $87.7 billion year-to-date, a flashpoint likely to dominate discussions when President Donald Trump travels to Beijing later this week to meet Chinese President Xi Jinping. Goldman Sachs economists noted that Beijing has also positioned itself as a potential mediator to reopen the Strait of Hormuz, a role expected to feature prominently at the summit.

Read Next: Trump Heads to Beijing as Trade Surplus and Iran Tensions Set Agenda