Iran Conflict, Oil Shock Inject Uncertainty into Fed Policy Path, Says SF Fed President Daly

San Francisco Fed President Mary Daly stated that the Federal Reserve's policy path is facing uncertainty due to the conflict in Iran and the subsequent oil price shock. Traders are showing skepticism regarding the Fed's anticipated 'Cut-Pause-Pause' interest rate decision pattern by April 2026.

Daly's remarks are prompting a reassessment of the Fed's strategy. Geopolitical instability and economic disruptions stemming from the conflict have lowered expectations for the projected rate decision sequence. The market is now pricing in a higher likelihood that the Fed may deviate from its planned course.

The oil shock, exacerbated by disruptions in the Strait of Hormuz, is also a significant factor. Tensions and potential supply constraints have increased the probability of elevated WTI crude oil prices in April.

The central question for investors and policymakers remains whether the Fed will adhere to its expected rate trajectory or adapt to geopolitical and economic pressures. New developments in the Iran conflict or shifts in the Fed's stance could rapidly influence these markets.