“The conflict in the Middle East was cited as a major source of uncertainty that complicated decision-making around hiring, pricing, and capital investment,” the Fed said in its “beige book” survey of economic conditions in the United States.

Many firms, it added, are “adopting a wait-and-see posture.”

US-Israeli strikes targeting Iran beginning on Feb 28 triggered Tehran to retaliate by virtually closing off the Strait of Hormuz, a key waterway for energy transportation.

Since then, oil prices have surged, putting pressure on vulnerable countries and those dependent on shipments from the region.

In the United States, “energy and fuel costs rose sharply” due to the conflict, the Fed said in its report.

This has led to higher freight and shipping costs, and steeper prices for plastics, fertilisers and other petroleum-based products.

Other price hikes were also widespread.

“Generally, input cost increases outpaced selling price growth, compressing margins,” the Fed said.

Meanwhile, many districts continued reporting “signs of consumer financial strain, increased price sensitivity, and rising demand at food banks and other social service organisations,” the report added.

Spending by higher-income consumers, however, remained resilient.

Employment was “steady to up slightly” during the survey period, the report said.

“Most Districts described labour demand as stable, with low turnover, minimal layoffs, and hiring mostly for replacement,” it added.