Energy expenses drove up US consumer prices in May more than three months into a confrontation with Iran, according to official statistics released Wednesday.

According to the Bureau of Labor Statistics, prices grew 4.2% from May 2025, the highest annual reading since April 2023, and 0.5% monthly, matching economists’ estimates. With prices jumping 3.9%, the energy index alone accounted for over 60% of the April rise.

“Today’s CPI data supported our assumption that increasing energy costs and their rippling effects on transportation and food would drive May headline CPI higher,” said Moody’s Ratings chief credit officer Atsi Sheth. “We expect energy prices to remain a driver of headline inflation until there is greater geopolitical certainty in the Middle East.”

May food costs rose 0.2% as cheese prices declined and coffee prices soared. Hospitalization costs rose 0.7% while auto insurance prices fell 1.7% from April.

Rising prices led to a 0.1% drop in workers’ real average hourly earnings, indicating a financial squeeze for Americans, according to Navy Federal Credit Union chief economist Heather Long on X.

Middle-class and low-income households suffer. It’s hard because gas, electricity, food, and medical care are all rising significantly.”

Prices grew 2.9% from last May and 0.2% from April on a “core” basis, excluding volatile energy and food expenses. Economists predicted a 0.3% monthly increase and 2.9% year-over-year.

The CPI report for May suggests the Federal Reserve will maintain interest rates at its June meeting. Wholesale inflation statistics on Thursday will also influence Federal Reserve policy. The labor market remains balanced, but inflation remains well above the Federal Reserve’s 2% long-term target, making it the bigger concern last week.