US wholesale prices surged at an annual rate of 6.5 percent in May, the fastest pace since November 2022, as the Iran war continued to push fuel costs higher. The Producer Price Index rose a seasonally adjusted 1.1 percent from April, well above Wall Street’s forecast of 0.7 percent. The Bureau of Labor Statistics released the data on Thursday.

Energy costs drove nearly 80 percent of the monthly increase. Gasoline prices at the wholesale level jumped 23.4 percent in May alone. The 2.8 percent surge in final demand goods prices for the month was the largest single monthly gain in the PPI data series, which dates back to December 2009.

Economists said the numbers reflected the direct economic toll of the US-Iran conflict. The closure of the Strait of Hormuz in late February cut off roughly a fifth of global oil and gas supply. Brent crude had traded near $105 a barrel in recent weeks before dipping on Thursday following Trump’s announcement of a ceasefire deal with Tehran.

The PPI typically feeds into consumer prices with a lag of several weeks. The consumer price index has already crossed 4 percent for the first time in three years. Economists warned that further increases were likely unless oil prices fell significantly and sustained that drop over coming months.

The Federal Reserve holds its next policymaking meeting June 16 and 17. Markets expect the central bank to hold rates steady at the 3.5 to 3.75 percent target range. But the persistence of energy-driven inflation has raised questions about whether a rate hike may become necessary later in the year. Fed Chair Kevin Warsh, confirmed by the Senate in a 54-to-45 vote earlier this year, has signalled a cautious approach.

Services inflation showed some moderation. Core PPI, excluding food and energy, rose 0.4 percent in May, slightly below the 0.5 percent consensus. Portfolio management fees contributed significantly to the services reading, rising 4.8 percent during a strong month for equity markets. Real wages have fallen slightly as inflation outpaces pay growth. The prolonged energy shock has weighed on businesses across manufacturing, transport, and retail throughout the spring.

Tariff-driven price increases from last year are compounding the pressure on households. Analysts said the path to lower inflation depended heavily on a resolution to the Iran conflict and a sustained reopening of the Strait of Hormuz. The defence sector has partially offset the broader economic damage by driving industrial demand, but economists said it could not compensate for the consumer price squeeze. Intermediate demand at stage one rose 3.2 percent in May, also a record for that calculation. The full dataset is published by the Bureau of Labor Statistics and covers final demand across goods, services, and construction. The May reading added to a string of inflation reports that have come in above expectations since February.