The conflict with Iran causing a rise in oil prices, triggering concerns about inflation, may lead to the Federal Reserve postponing interest rate cuts.

Economists say that Israel's attack on Iran may delay the Federal Reserve's interest rate cut as the Fed waits to assess the potential impact of inflation. Oil prices surged to the highest levels in months on Friday following Israel's attack, sparking concerns among investors about a broader conflict in the key global energy supply region of the Middle East. RSM US LLP Chief Economist Joseph Brusuelas stated that with oil prices rising amid fears of escalating conflict in the Middle East, the Fed is unlikely to take any significant actions in the short term, especially in light of President Trump's trade tariffs potentially fueling inflation. According to a report on Friday by Bloomberg economists Anna Wong and Tom Orlik, if oil prices further increase to $100 per barrel, the price of gasoline in the US could rise by about 17%, from $3.25 to $4.20 per gallon, causing inflation to reach 3.2% in June. Morgan Stanley's Chief Commodity Analyst Natasha Kaneva warned in a recent report that in a worst-case scenario, Iran's oil exports could decrease by 2.1 million barrels per day, impacting one-third of global oil production in the Middle East and potentially leading to oil prices soaring to $130 per barrel. She further noted that if the conflict escalates, oil price reactions would be exponential rather than linear, with prices potentially reaching $120-130 per barrel if the Strait of Hormuz is blockaded. The next Federal Reserve interest rate meeting is scheduled for June 17-18. The market widely expects the Fed to keep the benchmark interest rate unchanged and announce the latest policy forecasts. According to futures market data, investors currently predict around 1.9 rate cuts of 25 basis points by the end of 2025, slightly lower than the previous forecast of about 2.1 cuts. However, Morgan Stanley's Chief US Economist Michael Feroli remains cautious about the possibility of the Fed mentioning the Middle East situation in its statement following next week's meeting. He stated, "At this point, we question whether the Middle East situation is worth mentioning."