U.S. inflation worsened in February, rising to a 40-year high, and it could accelerate as geopolitical conflict in Eastern Europe threatens to disrupt the global economy. 

The annual inflation rate rose to 7.9% last month, the Bureau of Labor Statistics said Thursday. Its Consumer Price Index, which tracks price movements across a broad range of goods and services for consumers, showed an increase among food, rent and energy in February. Nearly a third of recent gains came from the gasoline index, which jumped 6.6%.

But the most recent report captures only a fraction of what has happened to prices following the Russian invasion of Ukraine. Since it began, the average cost for a gallon of gas has topped $4.32 in the U.S., the highest price on record, according to AAA. Economists predicted inflation would rise by 0.8% in February, but many who thought it could peak soon now envision additional inflation in March and possibly beyond as a result of the war.

Amid a tightening energy market, the U.S. oil benchmark West Texas Intermediate eclipsed $110 a barrel for the first time since 2008.

The increase is partly a result of a U.S. embargo on Russian crude oil, which accounts for 10% of global production.

“The issue with oil is that if we lose Russian supply there really is no one that can make it up,” said Christopher Low, Chief Economist at FHN Financial. “We’re expecting to see oil run up to $175 a barrel over the next couple of months.”

Core CPI, an index that excludes food and energy because they are prone to volatile swings, shows how inflation is emerging within the broader economy. It indicated a 6.4% increase for the 12 months ended in February, with the rising costs of rent contributing the most.

Autos have also been a driving force behind core CPI, but prices showed signs of slowing down last month. The price of new cars rose slightly and used cars fell by 0.2%. Yet, CPI estimates a used car is still 41% more expensive than compared to a year ago.

Experts predicted inflation would ebb, but now there is growing unease that a spiral of prices and wages could become entrenched in the economy. While American workers saw record wage growth in 2021, inflation has steadily outpaced those gains.

“The situation is getting worse and worse,” said Mikhail Melnik, an associate professor of economics at Kennesaw State University, who fears the economy could be sliding into a recession. “We’re going to have inflation in the system on an ongoing basis for a while.”

The Federal Reserve is expected to raise the federal funds rate by 25 basis points at its March meeting, attempting to cool the economy down by making it more costly to borrow. While widely expected on Wall Street, it would be the first time the Fed has raised rates since 2018, and many analysts are bracing for a flurry of rate hikes by the end of this year.

The Biden administration is also nervous about inflation, especially as midterm elections draw near. To curb prices at the pump, Biden recently announced that the “United States has worked with 30 other countries to release 60 million barrels of oil from reserves around the world.”

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