Service Industry Prices Climb As Iran War Persists

America’s service economy expanded last month amid a sharp uptick in input prices and shrinking employment levels.

That’s according to the Institute for Supply Management’s (ISM) Services PMI Index, released Monday (April 6) and showing that the measure of prices paid for services and materials rose to 70.7, the highest since October 2022.

ISM noted in its report that while businesses are noting a relaxation on tariffs, the U.S. war in Iran has driven up energy prices, with the conflict leaving the critical Strait of Hormuz closed to the shipping of oil and other essential materials.

“The predominant commentary this month was about impacts and adjustments due to the conflict with Iran and the expected flow through of higher oil prices at some point,” Steve Miller, chair of the ISM Services Business Survey Committee, said in a news release.

“Companies across many industries reported seeing higher gas and diesel pricing, and inventories of multiple goods increased to withstand supply chain disruptions or short-term oil price impacts,” Miller added.

He added that the survey showed price increases for construction material like lumber, copper and steel, and that while panelists did note some tariff impacts, “Iran-related impacts dominated the comments in March.”

The effects of the Iran War is being felt across a host of other sectors as well. For example, Amazon said last week that sellers using its shipping services will—starting later this month—be required to pay a fuel and logistics-related surcharge.

The surcharge will come to 3.5% and will be based on each seller’s fulfillment fees, not on the sale price of their items, the eCommerce giant said.

“Elevated costs in fuel and logistics have increased the cost of operating across the industry,” Amazon said in a blog post. “We have absorbed these increased costs so far, However, similar to other major carriers, when costs remain elevated, we implement temporary surcharges on our fulfillment fees to recover a portion of the actual cost increases we are experiencing.”

Meanwhile, a report last week by the Wall Street Journal (WSJ) said that airlines had begun adding new fees to help cover the rising costs of fuel.

“The reality is, jet fuel prices have more than doubled in the last three weeks,” United Airlines CEO Scott Kirby wrote in a letter to employees quoted by the WSJ. He said the airline has factored in the scenario of oil prices rising to $175 a barrel.

“If prices stayed at this level, it would mean an extra $11 billion in annual expense just for jet fuel. For perspective, in United’s best year ever, we made less than $5 billion,” Kirby said.