Israel-Iran Tensions Add Uncertainty to Oil Markets, Could Complicate Inflation Fight

• Israel-Iran conflict adds uncertainty, may push oil prices over $100 a barrel, complicating inflation fight and Fed rate cut plans • However, China production capacity and OPEC+ cracks could ease energy cost pressures
• 10% oil price jump typically lifts advanced economy inflation 0.1-0.2 ppts; likely not enough to sway policy • Fed remains firmly focused on bringing down inflation before rate cuts • Capital Economics still expects Fed to start cuts in September, ECB and BoE in June if energy prices don't spiral