Middle East War Elevates Energy Prices

Ongoing conflict in the Middle East is significantly increasing global energy prices, impacting central bank monetary policy decisions worldwide. This week, the U.S. Federal Reserve and the Bank of Canada are scheduled to announce interest rate decisions on Wednesday, March 13, 2026, followed by European and Japanese central banks on Thursday, March 14, 2026.

Disruptions to oil loading and transport facilities, coupled with calls to keep the Strait of Hormuz closed, have led to oil prices fluctuating around $100 per barrel and a surge in natural gas prices. This situation has prompted investors to revise their inflation and interest rate forecasts for the year. The CBOE S&P 500 and crude oil price volatility indices have both risen since the conflict began.

Central banks, including the U.S. Federal Reserve, are facing renewed inflationary pressures.

Despite a weak U.S. jobs report in February, expectations for rate cuts have tempered due to rising oil prices pushing inflation above target.

The Federal Reserve is anticipated to maintain current rates for a second consecutive meeting. Similarly, European central banks, including the European Central Bank and the Swiss National Bank, are now expected to consider rate hikes later in the year, while anticipated rate cuts from the Bank of England have been largely priced out.