WASHINGTON, April 9 (Reuters) - U.S. inflation increased as expected in February and likely rose further in March amid the war with Iran, a trend that is expected to discourage the Federal Reserve from cutting interest rates for a while.

Sharply rising gas prices drove inflation to 3.3% in March, the highest rate in nearly two years.

US inflation rises to a two-year high at 3.3% as oil prices surge due to Iran conflict, impacting fuel, travel, and overall living costs.

The monthly rate measured 0.9%, according to the Bureau of Labor Statistics. Gasoline prices rose by a record 21.2% last month

Treasuries fell as quickening inflation stemming from the US war on Iran — and the prospect of escalation — eroded wagers that the Federal Reserve will lower interest rates once this year.

March US CPI inflation is forecast to jump to 3.3% as soaring oil prices from the Iran conflict drive consumer prices up.

US stock index futures were flat as investors awaited March CPI data and assessed fragile US-Iran ceasefire tensions. Inflation expected at 3.3% could complicate Fed rate cut bets, even as Wall Street heads for strong weekly gains led by the S&P 500 and Dow.

The core Personal Consumption Expenditures (PCE) price index, which excludes food and energy, rose 3 per cent year-on-year in February, according to data released by the Commerce Department on Thursday. The headline PCE inflation print stood at 2.8 per cent, unchanged from January.