Market Shock From Iran Strikes Rekindles Inflation Fears Article originally posted on Globe St. on March 2, 2026 Energy markets could open the week on edge following Saturday’s U.S. and Israeli airstrikes on Iran, a development that threatens to tighten global oil supplies and keep inflation pressures alive well into the year. An analysis by Barron’s over the weekend suggests that the fallout could carry implications far beyond commodity trading—potentially reshaping expectations for Federal Reserve policy and dampening the near-term outlook for interest-rate cuts. Before the attacks, West Texas Intermediate crude had settled at $72.87 a barrel, a level reflecting months of relative calm in energy markets. When trading resumes in Asia, traders expect volatility to return as investors reassess risks to production and transport. The Strait of Hormuz, which channels nearly 20% of the world’s oil and liquefied natural gas exports, is again in focus, raising fears of supply disruption. As of this morning, crude oil prices surged by eight percent. Joe Brusuelas, chief economist at RSM, noted that investors often pivot toward dollar-denominated assets during early stages of conflict, a move that can push oil higher as risk premiums expand. If that rise persists, it could flow quickly into consumer prices. Gasoline costs, already hovering near $3 per gallon, could climb to $3.10 to $3.15 in the coming weeks, according to Patrick De Haan, head of petroleum analysis at GasBuddy. Even modest increases now carry outsized weight in monetary discussions. Inflation has remained above the Federal Reserve’s 2% target for nearly five years, while tariff-related costs and sticky service prices have slowed progress toward normalization. For the Fed, energy prices present a familiar but thorny problem. The central bank’s preferred inflation gauge—the core personal consumption expenditures index—excludes energy. Yet policymakers can’t easily disregard a commodity shock when consumer expectations are already fragile. Rising gasoline prices, visible at every fuel pump, tend to reinforce public perception that inflation remains entrenched. Several Fed officials have warned against premature easing without stronger evidence that price trends are sustainably cooling. If energy costs rise and stay high, those arguments could gain influence, supporting a “higher-for-longer” stance on interest rates. Traders have already reduced the odds of a June rate cut, according to data from the CME FedWatch tool. The delicate balance lies in how oil affects both growth and prices. Higher energy costs act like a tax on both households and businesses, curbing spending and narrowing profit margins. For commercial real estate and other capital-dependent sectors, that dynamic can translate into slower leasing momentum, delayed development timelines and higher financing costs as borrowing rates stay elevated. Still, an extended surge in oil might eventually restrain demand-driven inflation by cooling overall economic activity. That paradox—upward pressure on prices coupled with downward pressure on growth—creates a policy dilemma reminiscent of earlier supply shocks. Policymakers are unlikely to dwell explicitly on Iran in their upcoming March meeting, but references to “heightened geopolitical risks” and “energy market uncertainty” could surface in official commentary, Barron’s speculated. Comparisons to 2022, when Russia’s invasion of Ukraine sent crude to historic highs, only underscore the relative restraint of the current episode: Iran exports less oil than Russia, and global inventories are healthier. Yet the context is less forgiving today. Inflation expectations remain delicate, tariffs are adding incremental pressure to goods prices, and services inflation continues to run above target. Against that backdrop, even a moderate energy shock could reinforce the Fed’s cautious stance. If crude stabilizes above recent levels, markets may need to adjust to the possibility that interest rates—and the cost of capital across commercial property—will remain elevated longer than investors had hoped.