NEW YORK, April 30 (Xinhua) -- Fast-rising gasoline prices pushed the U.S. Federal Reserve's preferred inflation gauge to 3.5 percent in March, marking its highest rate in almost three years, according to new economic data released on Thursday.

The U.S. personal consumption expenditures (PCE) price index for March rose 0.7 percent from February, a faster-than-expected acceleration from the previous monthly pace of 0.4 percent, according to the U.S. Bureau of Economic Analysis.

The annual rate of inflation, which jumped from 2.8 percent in February, is now running at its fastest pace since May 2023. Economists had broadly expected the price index to rise 0.6 percent for the month and 3.6 percent on an annual basis.

The sharp hike in energy prices, an aftershock of the Middle East war's squeeze on the global oil trade, largely caused the sudden jump in headline inflation. The ongoing conflict involving the United States, Israel, and Iran, now entering its ninth week, has sent shockwaves through the global economy.

Shipping traffic in the Persian Gulf and the Strait of Hormuz has slowed to a trickle, choking off a vital waterway for trading oil, natural gas, fertilizer, and other critical materials.

"In the near term, higher energy prices will push up overall inflation. Beyond that, the scope and duration of potential effects on the economy remain unclear, as does the future course of the conflict itself," said Federal Reserve Chairman Jerome Powell on Wednesday.

The Fed will be very cautious about looking through energy-driven inflation as U.S. inflation has been above its target of 2 percent in the last few years, according to Powell.

"This is a split-screen economy," said Heather Long, chief economist at Navy Federal Credit Union. "Companies and investors involved in AI are on fire. Meanwhile, middle and moderate income households are struggling with high gas prices and inflation that's back at the hottest level in three years."

In other broader economic data released Thursday, the Commerce Department reported that U.S. gross domestic product (GDP) grew at a 2 percent seasonally adjusted annualized pace in the first quarter of 2026. While this marks a notable acceleration from the 0.5 percent growth recorded in the fourth quarter of 2025, it fell short of the market estimate of 2.2 percent.

Meanwhile, the United States labor market showed unexpected resilience. The Labor Department reported that initial jobless claims totaled a seasonally adjusted 189,000 for the week ending April 25.

"We are relatively optimistic that the U.S. economy will withstand the global supply shocks -- at least in the short run -- but we are becoming more concerned that the global economy is going to have a much more difficult time weathering the upcoming storm, so keep an eye on the second half of the year which could get a lot more jumpy in Q3 and potentially Q4 as well," Chris Zaccarelli, chief investment officer for Northlight Asset Management, wrote Thursday morning.