Analysis: Middle East Conflict Pushes Up Inflation Expectations, Market Concerns About Fed's Difficulty in Cutting Rates

SmartContractAuditor · 2026-03-13T08:37:57+00:00

Middle East conflict drives oil prices higher, pushing up U.S. short-term inflation expectations and clouding the Federal Reserve's rate-cut outlook. Data shows breakeven inflation rates have risen to elevated levels, with analysts pointing out that high oil prices could impede the Fed's rate-cut timeline. Traders estimate a 44.7% probability that rates will not be cut by 2026.

SmartContractAuditor

2026-03-13 08:37:57

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Odaily Planet Daily reports that as the Middle East conflict escalates, causing oil prices to surge, market expectations for short-term U.S. inflation have significantly increased, further fueling concerns about the Federal Reserve’s rate cut prospects. Data shows that the one-year breakeven inflation rate has risen to 4.62%, the highest since June 2022; the two-year breakeven inflation rate has also increased to 3.18%, reaching a nearly one-year high. Analysts point out that if high oil prices continue to drive inflation upward, the Federal Reserve may find it difficult to start rate cuts from the current 3.5%–3.75% level. Traders currently estimate the probability that the Federal Reserve will not cut rates throughout 2026 has risen to about 44.7%.

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