US inflation has risen sharply to 3.8%, its highest level in three years, driven mainly by a surge in petrol and diesel prices linked to the conflict with Iran. Higher fuel costs are now feeding through into other areas of the economy, including food, airfares and some household goods, increasing pressure on consumers and businesses. Core inflation, which strips out food and energy, also edged higher, suggesting price pressures are becoming broader. For investors, this makes the outlook for interest rates more complicated. Markets had already reduced expectations for US rate cuts, and the latest data gives the Federal Reserve less room to ease policy while inflation remains above target. Treasury yields rose after the release, with the two-year yield briefly moving above 4%, while higher oil prices added further pressure across bond markets.