April CPI Expected to Hit Near Three-Year High Amid Oil Shock

CNBC reported Monday that April’s consumer price index is expected to register its highest annual rate in nearly three years. Economists polled by Dow Jones forecast a 3.7% year-over-year gain. A monthly increase of 0.6% is anticipated, driven largely by an ongoing energy shock tied to the Iran conflict.

Oil Shock Pushes April CPI Toward a Multi-Year Peak

The last time headline inflation reached a comparable level was autumn 2023. At that point, prices were cooling from a prior energy spike caused by the Russia-Ukraine war. Tuesday’s print threatens to revive those uncomfortable comparisons. Jordi Visser, head of AI Macro Nexus Research at 22V, warned in a note that the two most recent months of data resemble the sustained price surge of 2022 far more than the gradual disinflation markets have assumed was underway.

Visser pointed to rising costs across transportation and warehousing as evidence the shock is bleeding beyond energy. The Strait of Hormuz remains closed to normal shipping traffic. “Movement, storage and replenishment are all becoming more expensive at once,” he told CNBC, framing it as a structural problem rather than a short-lived disruption.

Also Read: Fed Holds Rates Steady as Officials Weigh Conflicting Economic Signals

Background: From Disinflation to a New Inflation Scare

For much of 2024 and 2025, the Federal Reserve was navigating a slow but steady return toward its 2% inflation target. Core CPI, which strips out food and energy, had been broadly well-behaved. Tuesday’s report is forecast to show core prices climbing 0.4% on a monthly basis and 2.7% annually. That renewed upward drift complicates the Fed’s calculus considerably.

Markets had largely priced in a patient, hold-and-watch approach from policymakers. Inflation derivatives remain elevated relative to late last year but have not yet signaled a crisis. Futures markets still reflect expectations of no imminent Fed action.

Also Read: What the Strait of Hormuz Closure Means for Global Energy Markets

Rate Hike Risk Is Being Underpriced, Bank of America Warns

Bank of America US rates strategy head Mark Cabana argued in a recent note that investors are not adequately pricing the possibility of Fed rate increases. He noted that the last hiking cycle following the pandemic erased roughly 25% from the S&P 500. Any new hikes would likely be more modest in scale, he acknowledged, but risk assets would still react poorly if the Fed moved to actively restrain growth.

Incoming Fed Chair Kevin Warsh‘s preference for rate cuts creates its own dilemma. Visser cautioned that an easing push in the current environment could seed an inflationary boom by year-end, while a failure to cut could expose markets to hike risk. Either path carries significant consequences for portfolios heading into summer.

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