Ryan Sweet of Oxford Economics: Israel-Iran conflict could accelerate Fed rate cuts

Ryan Sweet of Oxford Economics believes that a prolonged conflict between Israel and Iran could push the US Federal Reserve (Fed) to cut rates earlier than expected. 

Escalating tensions in the Middle East have led to a jump in oil prices. Such sudden spikes tend to cause only a temporary rise in consumer prices that the American central bank usually overlooks. However, given the weakening US economy, a persistent surge could pose greater risks to the country’s GDP growth and jobs than inflation. In this case, the Fed may take a more dovish stance on monetary policy, says Ryan Sweet. 

Meanwhile, Wall Street analysts warn that a prolonged Israel-Iran conflict and the potential closure of the Strait of Hormuz could push oil prices up to $130 per barrel. This would drive US inflation as high as 6%, delaying rate cuts by the Fed until early 2026.