US wholesale prices rose sharply in March as the Iran war pushed up energy costs, increased inflation pressures and complicated the Federal Reserve’s policy outlook.Producer prices, which measure inflation at the wholesale level before it reaches consumers, rose 0.5% from February and 4% from March 2025, the largest annual increase in more than three years, the AP reported.Energy prices rose 8.5% month-on-month, reflecting the impact of the Middle East conflict on global oil markets.However, core producer prices – which exclude volatile food and energy components – rose a modest 0.1% from February and 3.8% year-on-year, indicating relatively contained underlying inflation.The rise in wholesale inflation adds to the challenges for the US Federal Reserve, which is under pressure from President Donald Trump to cut interest rates, even as some policymakers are leaning toward tightening due to persistent price pressures.Food prices, a politically sensitive component ahead of next year’s midterm elections, fell 0.3% in March after rising 2.4% in February.Economists closely track wholesale inflation because it provides an early signal on consumer prices, which include components such as healthcare and financial services in the Fed’s favorite gauge – the personal consumption expenditure (PCE) index.“The decline in food prices is long overdue, and that’s welcome news for everyone,” said Carl Weinberg, chief economist at High Frequency Economics. “Rising food prices are at the heart of the political debate over affordability.”The latest data follows a sharp rise in consumer inflation, with gasoline prices pushing the consumer price index up 3.3% year-on-year in March – the largest increase since May 2024 – and 0.9% month-on-month, the fastest increase in nearly four years.Meanwhile, the International Energy Agency (IEA) warned that the Iran war could lead to the first annual decline in global oil demand since the pandemic.The agency said oil demand is expected to fall by an average of 80,000 barrels per day this year, a sharp contrast to its earlier forecast of an increase of 850,000 barrels per day.The decline in demand has been driven by attacks on energy infrastructure and the closure of the Strait of Hormuz, with the IEA forecasting a decline of 1.5 million barrels per day in the current quarter.Although the initial impact has been concentrated in the Middle East and Asia-Pacific, demand is expected to remain subdued as rising oil prices and supply constraints persist.