The conflict in the Middle East continues with attacks from the U.S. And Israel against Iran, and retaliatory strikes against Israel and other countries in the region.
Oil and gas prices have surged as large volumes of oil and gas are effectively stranded inside the Strait of Hormuz due to shipping disruptions.
Brent crude oil is currently trading above $100 per barrel.
This price level presents a “challenging balancing act” for the U.S. Central bank, according to Kjersti Haugland, chief economist at DNB Carnegie.
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“The balancing act between getting inflation down to two percent again and achieving maximum employment is challenging, especially since inflation has been above target for almost five years already,” Haugland wrote in a morning report.
Wednesday will see what is perhaps the most important event on the economic calendar this week, as the Fed announces its next interest rate decision.
“If oil prices continue to rise and there is a supply shock, it increases the risk of a prolonged conflict,” said Frank Jullum, chief economist at Danske Bank, in a report.
“The market is pricing in a rate cut, but that’s not something I think is realistic right now,” she said.
