US inflation surges to three-year high of 4.2%

US prices in May rose at their fastest rate in three years, with inflation surging to 4.2%.

It marked the third month in a row the Consumer Price Index (CPI) has risen, with households increasingly feeling the strain of the US and Israel's war in Iran.

Higher inflation raises the likelihood of the US Federal Reserve raising interest rates in a bid to curtail spending.

The last time inflation was higher was in April 2023, when the US was still grappling with the fallout from the energy shock sparked by Russia's invasion of Ukraine.

Overall energy bills including gas and electricity were almost a quarter higher in May than a year earlier, with petrol responsible for much of the increase.

According to separate figures from motoring group the AAA, the average price of a gallon of regular petrol in the US is currently $4.15, a sharp increase from $2.98 on February 28, when President Donald Trump launched strikes on Iran.

In response to the strikes, Iran has effectively shuttered the crucial Strait of Hormuz waterway, typically responsible for shipping around a fifth of the world's oil and gas which has resulted in a surge in prices.

Elsewhere, the BLS pointed to the increasing cost of plane tickets, personal and medical care, recreation and communication.

The CPI is a measure of how much prices have risen in a given month compared to the same month a year prior. The Fed's long-term inflation target is 2%.