The ongoing US-Iran military escalation, now in its third week, has driven oil prices higher and pushed year-over-year inflation to 3.8%, the highest since mid-2023. The Federal Reserve has maintained steady interest rates throughout 2026, and prediction markets now price a 67% probability of no rate cuts this year.
New Fed Chair Kevin Warsh, confirmed May 16, faces political pressure from the Trump administration to cut rates, but can credibly attribute the central bank's stance to external supply shocks. The International Monetary Fund has also warned of prolonged inflation risks from the conflict. Safe-haven demand for gold remains moderate, with limited price surge as markets await further developments.