Key Takeaways
The fallout from the Iran war will likely weigh on markets for much of 2026, dashing hopes of Federal Reserve rate cuts until the third quarter at the earliest as the conflict roils global energy supplies.
"The fallout from the Iran war will likely weigh on markets for much of 2026, dashing hopes of rate cuts until Q3 by the earliest," analyst Nic Puckrin said in a note.
The conflict has violently upended energy forecasts, flipping the global oil market from a projected 1.63 million barrel-per-day (bpd) surplus to an expected 750,000 bpd deficit this year, a recent Reuters poll shows. In response, analysts have lifted their 2026 Brent crude forecasts by around 30% to $82.85 a barrel, with prices already up about 50% since the war began.
This combination of a severe oil supply shock and delayed monetary easing is set to increase market volatility, fostering a risk-off environment that could pressure equities while increasing demand for safe-haven assets like gold and the U.S. dollar.
The war, which began on February 28, has effectively removed roughly 9 million bpd of crude supply from the market, according to an April 9 estimate from ANZ bank. The disruption is centered on the Strait of Hormuz, a vital passageway for about a fifth of global oil consumption, where flows have nearly stalled. Macquarie Group strategist Vikas Dwivedi noted that an estimated 136 million barrels of crude oil and products are currently stuck in the Gulf due to the conflict.
Restoring that supply will be a slow and bumpy process. Analysts at ANZ project that only 2 million to 3 million bpd can be recovered in the first month after a sustained ceasefire, with another 2 million to 3.5 million bpd returning over the rest of the second quarter.
However, the bank warned that operational friction and damaged infrastructure mean the recovery is unlikely to be smooth. More critically for long-term inflation, ANZ estimates that 1 million to 2 million bpd of production capacity may be permanently lost, setting the stage for a structurally tighter market and higher price volatility. This persistent inflationary pressure from energy complicates the Federal Reserve's ability to ease monetary policy, supporting Puckrin's forecast for a delayed pivot to rate cuts.
This article is for informational purposes only and does not constitute investment advice.
