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Inflation jumped to 4.6% in the year to March, from 3.7% the month before, in what the treasurer, Jim Chalmers, warned was the start of an Iran war-linked fuel shock that will ripple through the economy over coming months.

With consumer prices now growing at their fastest pace in two-and-a-half years, financial markets are betting the Reserve Bank will hike interest rates for a third straight meeting next Tuesday as officials struggle to manage the nightmare scenario of containing inflation even as growth is expected to slow sharply.

The treasurer ahead of next month’s budget said “inflation is likely to peak higher than this”, even as he reassured Australians that the economy was well placed to navigate the fallout from the war.

“We’ve got low unemployment, we’ve got solid wages growth, and so we’ve got pretty good foundations as we confront this period of heightened uncertainty in the global economy,” he told reporters in Brisbane.

The international oil price pushed back above $US110 a barrel overnight amid dimming hopes of an end to the US-Israel-instigated conflict that has closed the strait of Hormuz, a critical artery for the global flow of oil and other key commodities such as fertiliser.

Fuel costs jumped by 33% in the month, according to the latest figures from the Australian Bureau of Statistics, although this was before the 26-cent cut to the petrol excise.

Removing the impact of the large price swings – electricity prices were also up sharply on a year earlier as government rebates expired – showed underlying inflation was steady at 3.3%, an encouraging sign that inflationary pressures beyond the bowser eased in March.

The data also showed annual inflation as measured by the quarterly figures, rather than newer monthly numbers, climbed to 4.1%, from 3.6% in December.

Analysts predict consumer price growth will continue to climb from here as the surge in petrol and diesel costs flows through to the price of other goods and services.

Westpac economists, before the release of the latest data, expected inflation to reach as high as 5.8% in May, and only retreat to 4.7% by the end of this year.

The latest data confirms cost of living will be at the top of the government’s agenda in the 12 May budget.

Labor has already halved the fuel excise for three months and announced a GST rebate on petrol and diesel that has helped cushion the blow on motorists from soaring pump prices.

Economists warn that further untargeted cost-of-living support risks complicating the RBA’s battle to bring inflation back under control.