United States, Israel and Iran Agree to Temporary Ceasefire

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A two week temporary ceasefire in the current Middle East hostilities has been agreed, but only one hour before President Donalds Trump’s deadline where he had promised to obliterate Iran. The ceasefire, which was brokered by Pakistan, includes a 10-point plan with Iran opening up the Strait of Hormuz whilst on-going peace talks continue. As a result, oil fell below $100pbl, with Brent crude falling by as much as 16% to trade within a range of $93pbl – $95pbl. West Texas Intermediate also fell to around the $95pbl mark. 

Those close to the agreement have advised that the 10-point peace plan includes:

  • An end to attacks on Iran and its allies
  • Continued control by Iran over the Strait of Hormuz
  • All primary and secondary sanctions on Iran to be lifted 
  • US military withdrawal from the Middle East
  • The release of all frozen Iranian assets
  • Iran and Oman to levy fees on ships transiting the Strait of Hormuz (USD 2 million per ship)

Interestingly, the above points are also in Farsi, however that document includes the words “acceptance of enrichment” for their nuclear plan, which for whatever reason was left out of the English version. According to a statement issued by state media, Iran will only accept an end to hostilities if the final version of the peace plan incorporates the above demands. Some of these demands have been rejected by the White House in the past, however President Trump said the 10-point peace plan was a “workable basis on which to negotiate”. 

However, a number of experts have advised that the United States are unlikely to agree with some of Iran’s demands, and Democratic Senator Chris Murphy noted that with Iran controlling the Strait of Hormuz, it would be “cataclysmic for the world”. The office of the Prime Minister of Israel, Benjamin Netan, advised that Israel has backed the decision to temporarily cease hostilities with Iran, however, the ceasefire does not include Israel’s current hostilities with Lebanon.

Experts and analysts suggest that whilst the President sees a framework to discuss a permanent ceasefire, they cannot see the United States agreeing to allow Iran to continue with nuclear enrichment. Political commentators advise that the temporary ceasefire has let President Trump “off the hook” in regard to his promise to obliterate Iran. They also note that one of the cornerstones of the attack on Iran was to get rid of the current leadership and return the country to a democratic government. 

Sadly, this has not happened, in fact, nothing has really changed. The IRGC (Islamic Revolutionary Guard Corps) remains the dominant force, and the old guard leadership that has essentially been wiped out has been replaced by more extreme figures. Furthermore, it should be remembered that the IRGC controls 50% of all the income from Iran’s energy exports, so if all sanctions are lifted and all assets unfrozen, this will make them even stronger. 

Experts say that if any agreement is reached it will surely be a hollow victory at best for President Trump, and how this will play out in the US with the mid-terms looming could end up being totally catastrophic for the Republican party. The only other option is a resumption of hostilities, which will be a nightmare for those peace-loving citizens of Iran, and the economic and social repercussions on the rest of the world do not bear thinking about. 

How Does Today’s Oil Crisis Compare to that of the Early 1970’s

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Current Impact on Consumers

As a result of the United States/Israel/Iran war the world is now reeling from a global energy shock with prices of gas, electricity and fuel at the petrol pumps all hitting the consumer where it hurts, in the pocket! In the United Kingdom, diesel prices at the pumps before the war started were circa 134p per litre, whereas today they are circa 185p per litre and rising. On the intercity motorway’s, diesel is being offered in some cases at even 200p per litre. In the EU (European Union), commentators advise that Brussels are drawing up plans for potential rationing of jet fuel and/or diesel with officials stressing that these are just emergency plans. 

Lessons from the 1973 Embargo

The oil crisis back in the early 70’s was fundamentally different to the crisis the world is facing today, but the potential outcome of today’s crisis is essentially the same: It could trigger a global financial and economic crisis. The crisis began in 1973 when OAPEC*  members imposed an oil embargo on the United States and other nations who were supporting Israel in the Yom Kippur War. The result was the quadrupling of oil prices, severe shortages and rationing that consumed the countries involved. When the embargo was lifted in March 1974, there were economic recessions, massive inflation and major and lasting shifts in global energy policy. 

*OAPEC  – Founded in 1968 and stands for the Organisation of Arab Petroleum Exporting Countries, limited to Arab oil-exporting nations. With headquarters in Kuwait the current membership includes Algeria, Bahrain, Egypt, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, Syria, Tunisia, and the UAE (United Arab Emirates). This is a separate group from OPEC (Organisation of Petroleum Exporting Countries) which was founded in 1960, membership includes countries from Africa, the Middle East and South America. 

The Strait of Hormuz Blockade

Today’s oil crisis is different from the 1970s insofar as oil, gas and fertiliser shortages are due to the current United States/Israel/Iran conflict. This has resulted in the blockade of the Strait of Hormuz, through which circa 20% of the world’s oil and natural gas is shipped. Analysts and experts in the energy and economic arenas are at loggerheads as to the potential fall-out from this crisis, but all are agreed that this war should end sooner rather than later. 

Potential for Greater Economic Instability

A number of experts suggest that the fall-out from this crisis could be worse than the 1973 crisis, where both the USA and the UK suffered recessions from 1973 – 1975. In the UK, this resulted in the downfall of the Edward Heath led conservative government. One expert has suggested that currently, there could be a bigger energy shock as opposed to the early 70’s when there was a cut in oil of 5% – 7%, however, today we are looking at a global cut of circa 20%, and things will only get worse the longer the crisis goes on. Not only will there be a massive spike in oil, gas and food prices, but there will also be hikes in interest rates to combat the inevitable inflation. 

Supply Chain Risks: Beyond Fuel

Currently, there is irrefutable proof of what the future may hold as jet fuel has almost doubled, which will lead to increases in airfares, prices for the consumer at the pumps for diesel and petrol have already risen, and some foodstuffs in supermarkets are already seeing an increase in prices. One third of the world’s helium flows through the Strait of Hormuz, which is essential for the production of semi-conductors or micro chips used in just about everything consumers use on a daily basis. Analysts report that the Gulf region is also central and crucial to the global fertilizer supply, and if it becomes scarce the world could also be in for a food shock to add to the on-going energy shock.

The Long Road to Recovery

Consumers and governments alike are lucky that summer is fast approaching, therefore resulting in lower heating costs to households. However, experts advise that if the war was to end tomorrow, it would take at least a year for supply lines to get back to normal, and a further year to see a reduction in prices. However, if there has been substantial damage to refineries and export outlets, then analysts suggest it could be up to five years before normality resumes. 

The Limitations of Renewable Energy

Data shows that in the EU, wind and solar energy combined now outpace fossil fuel generation by 30% – 29%, and in the UK in 2024, renewables for the first time produced more than 50% of electricity. However, despite forward steps being made for renewables taking over from fossil fuels, and despite the ongoing rhetoric, the crisis in the Middle East shows that even after just five weeks of the Strait of Hormuz being closed, there is already an energy crisis which highlights how far renewable energy still has to go. It is hoped that this conflict will end soon, otherwise, and according to experts, there could be intolerable economic hardship.

The Loss of Helium Exports Due to the Iran Crisis Will Prove Critical

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Helium is a colourless, odourless, non-flammable, non-renewable inert gas. It is commercially extracted from natural gas using fractional distillation*. As the second lightest and second most abundant element in the universe, helium has widespread applications across multiple industries and medical fields. The sudden disruption to helium exports via the Strait of Hormuz is now having a significant negative impact on the medical sector, semiconductor manufacturing, and several other critical industries.

*Fractional distillation is a laboratory and industrial process used to separate mixtures of liquids with different boiling points. In the case of helium, it involves a cryogenic process in which natural gas is cooled to extremely low temperatures. This takes advantage of helium’s exceptionally low boiling point (−268.9°C), allowing it to be separated from nitrogen, methane, and other components.

Roughly two-thirds of the world’s helium supply comes from the United States, with much of the remainder supplied by Qatar. With the Strait of Hormuz currently closed, supply lines have effectively been choked. This disruption is now threatening the production and operation of semiconductor-based technologies used in everything from automobiles and washing machines to smartphones, space systems, and artificial intelligence infrastructure. Helium plays a vital role in semiconductor fabrication, particularly in cooling extreme ultraviolet lithography machines used to print microchips.

At present, around 200 helium containers remain stranded in the Persian Gulf, each holding approximately 41,000 litres of liquid helium. Experts warn that the gas will gradually boil off within 35 to 48 days, rendering the shipments unusable. These containers were destined for South Korea and Taiwan, which together manufacture approximately 90% of the world’s most advanced semiconductors. Without chips, global supply chains face severe disruption. Some analysts have even highlighted the knock-on effect on defence systems, noting that modern AI-driven technologies rely heavily on semiconductor availability.

In the medical sector, the shortage of helium is already affecting hospitals and diagnostic centres worldwide. MRI (magnetic resonance imaging) machines rely on helium to cool superconducting magnets to extremely low temperatures. Current shortages are delaying refills, increasing operational costs, and threatening the continuity of MRI services. Beyond MRI systems, helium is also critical for NMR spectrometers, cryosurgery procedures, and respiratory treatments.

  • NMR spectrometers are used to determine molecular structures essential for research and pharmaceutical development.
  • Cryosurgery and cryoablation use helium’s ultra-low temperatures to freeze and destroy diseased tissue.
  • Respiratory medicine uses helium-oxygen mixtures (heliox) to treat severe airway obstructions.

Donald Trump has issued an ultimatum stating that the United States will withdraw from the war zone “with or without a peace deal” once Iran’s nuclear capabilities are neutralised. However, logistics experts caution that even after hostilities cease, it could take more than three months for helium supply chains to normalise. If there is significant structural damage to Qatari production facilities, shortages could persist for years.

White House officials have indicated that US military forces could begin returning home within three weeks. However, recent history suggests that such timelines are often optimistic and subject to change.

Without semiconductors, modern economies could grind to a halt. Chips underpin almost every aspect of daily life, from aviation and automotive systems to global shipping, communications, and digital infrastructure. In emerging markets, access to MRI technology is already becoming limited, and prolonged disruption could soon affect developed nations as well.

Beyond the geopolitical narrative, the helium shortage represents a critical vulnerability in global supply chains. If the conflict continues, the consequences of helium scarcity may prove more damaging than the geopolitical tensions that caused it.

MBaer Merchant Bank AG Accused of Money Laundering

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MBaer Merchant Bank AG, Zurich, which was co-founded in 2018, has been forced to close due to alleged breaches of AML (anti-money laundering) laws. No less a figure than Scott Bessent, the United States Treasury Secretary, has stated that the bank dealt with intermediaries acting on behalf of Russia and Iran, with in excess of USD 100 billion allegedly funnelled back to these two countries. It was Secretary Bessent’s intervention that ultimately brought the curtain down on this small but lucrative private bank.

US investigators working for Financial Crimes Enforcement Network (FinCEN), a division of the US Department of the Treasury, identified illicit AML links to Venezuela as far back as 2020. They allege that further activity over the following five years enabled Russia to finance its ongoing invasion of Ukraine, while Iran, including the Revolutionary Guard Corps, received funds linked to oil sales.

FinCEN stated in an official document issued on 2nd March:


“MBaer has also provided access to the US financial system to persons providing material support to Iran-related money laundering and terrorist financing efforts, including support to Iranian foreign terrorist organisations.”


Officials went on to accuse the bank of organising illicit payments on behalf of the Quds Force* of Iran’s Revolutionary Guard in connection with money laundering schemes and international oil smuggling.

*The Quds Force is a specialised branch of Iran’s Revolutionary Guard Corps responsible for extraterritorial operations, unconventional warfare, and military intelligence. It is known for supporting proxy groups such as Hezbollah, Hamas, and the Houthis, and is designated by the United States as a foreign terrorist organisation.

In 2023, Swiss Financial Market Supervisory Authority (FINMA) and US authorities began a more intensive investigation into MBaer, followed by a 2024 review of the bank’s operational structure by Wenger Vieli Ltd, which identified widespread systemic risks. A formal investigation by FINMA later that year found that 98% of the bank’s recent client assets originated from high-risk sources. The report concluded that the bank had failed to carry out adequate due diligence on its clients and had assisted them in avoiding asset freezes.

Two senior executives, Mike Baer, the bank’s co-founder, and Von Merey, have now left the firm. Sources close to the investigation suggest that FINMA has begun proceedings against four unnamed individuals associated with the bank. The bank’s high-risk clients now face prolonged uncertainty, with experts warning that any resolution could take years. In the meantime, it is considered unlikely that other Swiss financial institutions will offer them services.

Elsewhere in the United Kingdom, it was announced that the *Prudential Regulation Authority (PRA) has fined the Bank of London £2 million for misleading the regulator regarding its capital position. The bank was found to have fabricated documents that concealed its financial health. The PRA concluded that the bank failed to maintain adequate financial resources between October 2021 and May 2024 and breached more than a dozen regulatory requirements in the process.

*PRA – is a UK financial services regulatory body, part of the Bank of England and was formed as one of the successors to the Financial Services Authority (FSA) – now known as the Financial Conduct Authority(FCA). Established in 2013, it is responsible for ensuring capital adequacy, sound risk management, financial stability across 1200 banks, building societies, credit unions and insurers. 

The Bank of London was first thrust into the spotlight in September 2024 when UK tax authorities issued a winding-up order over an unpaid tax debt, which was later withdrawn. In August 2025, the regulator instructed the bank to stop onboarding new customers, a restriction that was formally enforced on 18th March 2026. The bank has accepted the PRA’s findings and stated that a new management team is now in place to strengthen governance and regulatory reporting.

On-Going Iranian War means a Farewell to Cheap Flights

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Due to the on-going Iran conflict in the Middle East, the world can say a farewell to cheap flights, especially for those wishing to connect between Asia and Europe. Recent data released shows ticket prices rocketing, up by 560% this month. According to a number of aviation experts, the world’s busiest and largest transit corridors are airports located within the Persian Gulf region, as such, prices are expected to remain elevated throughout the summer on to autumn, and likely even the Christmas period. 

The disruption to flights, which began on 28th February, has resulted in circa 70,000 flights being cancelled. This combined with rising fuel costs (jet fuel has more than doubled), reduced capacity and the shutdown of airspaces, has experts expecting elevated airfares to remain well into late November and likely into January 2027. Experts within the aviation arena suggest that price reductions to jet fuel may take a minimum of twelve weeks to work their way through to the airlines, depending on how quick supply lines become unfettered. 

The disruption to the Persian Gulf corridor is reflected in prices from Hong Kong to London, where an average fare is now circa $3,318, an increase of 560% on February prices. Other examples are the Sydney to London route (AKA the Kangaroo Route) which fares are up 429% for the same period, as well as Bangkok to Frankfurt, which has spiked to $2,870 and increased by 505% for the same period. Analysts advise that jet fuel accounts for around one third of operating costs and a number of airlines have already raised fuel surcharges. Pan European flights are expected to raise prices of tickets in the near future, as jet fuel increases are passed onto customers.

What is the “Taco Trade” and How is it Prevalent in Today’s Markets

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You might mistake this for a new Mexican futures derivative, but as financial commentators advise, the word TACO is an acronym for “Trump Always Chickens Out”. It describes a strategy where investors “buy the dip”* after a sell-off caused by a Trump policy threat, betting that he will eventually back down or soften his stance.

*Buy The Dip – This is a strategy which involves the buying of assets such as stocks and shares, cryptocurrencies and commodities such as gold and silver, where the aim is to buy low and then profit from the subsequent rebound. Experts advise it works best in long-term upward trends where temporary price dips occur. However, in today’s world, the Middle East crisis together with remarks from President Trump makes buying the dip an almost weekly occurrence. 

There are three stages to this trade:

  1. First, there is the shock when President Trump makes a bold announcement, such as an increase in tariffs, or in today’s world, military attacks and threats. Such actions can cause share and gold prices to drop, sparking off a round of intense market volatility. 
  1. The second stage is the Pivot where faced with negative market reactions or economic pressure, the President softens his stance or rhetoric, delays implementation, or negotiates a framework. 
  1. Finally, there is the Rebound where the threat is reversed, markets recover quickly allowing those who bought at low prices to sell for a profit. 

The TACO trade was initially brought to the fore on Liberation Day, 2nd April 2025, when President Trump announced a steep imposition of tariffs on friends and foes alike, with about 90 countries being hit with blanket tariffs. However, President Trump quickly backed down on his Liberation day tariffs, (except for China) as markets reacted by going into meltdown, and tariffs that were threatened on the Eurozone in May 2025 were quickly pulled back days after they were announced. 

A number of traders in the financial markets accused President Trump of chickening out and started making trades accordingly and thus the TACO trade was born. Today the Taco trade has been reborn with some vengeance due to the surprise attack on Iran by President Trump. The use of Truth Social by President Trump during the current US/Iran/Israel conflict has already upended markets. Recently, he rowed back on threats to hit Iran’s power plants.

So, President Trump chickened out and as a result of his pronouncements stocks rallied, oil prices dropped as he bought time for further negotiations. On another recent occasion, the President announced he was in talks with Iranian officials to end the war, once again oil fell, gold went up, and stocks went up. Iran announced that no talks had been held and the markets swung into reverse with gold going below the support level of $4100 per oz before rebounding to circa $4,400. The TACO trade is back and with markets as volatile as ever, will traders be able to predict what will come forth from Trump’s media outlet Truth Social. 

Is Gold Losing Its Lustre?

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In times of market turmoil and geopolitical unrest , gold is considered to be a safe haven with investors flocking to buy the yellow metal. However, at the close of business last Friday, gold extended its slide into a third consecutive week losing more than 6.00% and setting a record as its worst weekly performance since March 2020. Indeed, gold has shed more than 20% since the US/Iran/Israel conflict began and is currently trading at circa $4,400  – $4,435 per oz (showing great market volatility), from a high in late January of this year of just over $5,595 per oz.

The Impact of Monetary Policy and Inflation

Experts advise that gold is less appealing when interest rates remain high, and with energy costs surging due to the Middle East crisis, financial markets see the distinct possibility of interest rate hikes by central banks to ward off an increase in inflation. Both the Federal Reserve, the BOE (Bank of England) and indeed the ECB (European Central Bank), all held interest rates steady last week with money markets locking in bets for interest rate hikes this year by all three banks.

Central Bank Commentary and Market Expectations

In the Euro area, Joachim Nagel, a Governing Council Member of the ECB has said, “as things currently stand, it is conceivable that the medium-term inflation outlook could deteriorate and inflation expectations could rise on a sustained basis, meaning that a more restrictive monetary policy stance would probably be necessary”. There has been no official comment on interest rate hikes by the BOE, though they did highlight last Thursday concerns on the inflation front due to the Iran crisis. However, traders are betting on four interest rate hikes this year at 25 basis points per hike. 

ETF Outflows and Comparisons to 1983

Despite escalating geopolitical risk and geo-economic fallout due to the Middle East Iranian crisis, gold has failed to capitalise on its status as a safe haven, with data showing net outflows for gold ETFs reaching circa sixty tons since the start of the Iranian conflict. Analysts suggest the rapid fall in the price of gold is due to investor profit taking combined with sales of gold due to a higher dollar and rising interest rates. The last time gold plummeted so sharply was in 1983, when oil revenues collapsed and Middle Eastern oil producers dumped gold. 

Technical Support Levels and Market Volatility

Experts originally suggest that investors should look to a support level of $4,100 for gold if oil stays elevated, and an increase in bets on rate hikes by the financial markets keep ballooning. However, recently, gold briefly fell through the support level to $4,097.60, but as mentioned above it is currently trading in a range of $4,400  – $4,435 per oz. The gold market is experiencing extreme volatility as shifting investor sentiment and risk appetite, combined with algorithmic trading, continue to exacerbate price movements.

Geopolitical Outlook and Future Headwinds

The outlook for gold is based on the crisis in the Middle East, and if the situation moves towards a ceasefire, then rate hike expectations should diminish and should, experts say, trigger a recovery towards circa $4,800 – $5,000. Any movement in gold will also depend on the outlook from the Federal Reserve, with experts pontificating that if they look through the oil-driven inflation spike, it would remove a lot of the headwinds from gold. However, they went on to suggest that any increase in hawkish commentary would drive gold further down to new support levels. 

The Long-Term Investment Case

A number of analysts suggest that the fall in the gold price is a tremendous opportunity for investors to start buying, especially a staggered entry for long-term buyers. Analysts look to previous bull runs in 1971 – 1980 and 2001 – 2010 which saw a number of retreats that did not nullify any potential gains. Therefore, experts are suggesting that when the Iranian conflict is over, and the pressure on interest rate hikes deflate, gold will probably resume its safe haven status and prices will accordingly head north. However, analysts warn that the pace of any recovery in gold could be impacted by how long it takes for supply lines to recover. 

United Kingdom Suffers Cost of Borrowing and Energy Shocks

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The cost of borrowing for the UK government has soared to its highest level in eighteen years (when the global financial crisis 2007 – 2009 gripped the world) due to the economic shocks emanating from the US/Iran/Israel conflict. The Strait of Hormuz remains closed and 1/5 of the world’s crude oil remains in the ground, building fears of inflation shocks to many countries. In the United Kingdom, as of close of business on Friday 20th March, 10-year Gilts yields (a benchmark for government long-term borrowing costs) rose by 0.76%, capping a 5.00% rise since the start of the war in the Middle East. 

A Comparison with Global Markets

Experts suggest that the sell-off in UK government bonds is even more brutal than in 2022 when the previous Prime Minister Liz Truss introduced her mini-budget, which resulted in the UK government bond market taking a heavy beating. Analysts point to the fact the jump in the UK’s borrowing costs has not been matched in other economies, for example the corresponding rate on the 10-year German government Bund is only up 0.38% and in the United States the US treasury benchmark borrowing costs are up 0.41%. 

The UK’s Energy Vulnerability

Analysts point to why the UK government bond market is having a much worse time than many of their counterparts, which is due to the economy being more vulnerable to oil and gas price rises than many of their peers. In 2024, data shows that 35% of the UK’s total energy consumption was made up of natural gas (Europe’s reliance on gas is now only circa 1/5th of total energy consumption), which heats the vast majority of homes in the United Kingdom. This sadly reflects on the government once again not learning from the energy shock created by the invasion of Ukraine by Russia on 24th February 2022. The UK is therefore much more vulnerable to imported inflation (America being fairly secure as a net exporter of LNG). Data released shows that UK 1-year inflation expectations have risen 1.8% since the US/Iran/Israel conflict began, a much bigger increase than their peers in the USA and the Eurozone. 

Inflation and the Interest Rate Outlook

UK government bonds are highly sensitive to rising inflation; notably, 2-year gilt yields, which track Bank of England interest rate expectations, recently climbed to an over a year high of 5.35%. Brent Crude is currently trading at $106.77pbl with market expectations of the price going higher the longer the Strait of Hormuz remains closed, and money markets are now anticipating a rise in interest rates of 75 basis points this year. The energy shock is exacerbating the outlook on inflation and as the cost of borrowing rises, so will the effect on businesses and consumers in the United Kingdom. Already, costs of both diesel and petrol at the pumps have gone up, as have certain foods in the supermarkets.

The Impact on Households and Industry

Householders in the UK are already seeing mortgage deals pulled from the market, and as of July, this year consumers have been warned to expect a whopping 20% increase in energy bills. This increase could prove devastating for many households who are already struggling to pay their energy bills at today’s prices, especially alongside fuel and food price increases, making a very hard second half of 2026 for consumers. Elsewhere, in the airline industry, experts suggest that around the top 20 quoted airlines have lost a combined total of $54 billion in market value. The price of an airline ticket is also about to go through the roof due to jet fuel more than doubling in price since the Middle East conflict began. Despite the tendency for official narratives to focus on external pressures, consumers continue to face the direct consequences of these price spikes as historical economic patterns repeat themselves.

ECB Keeps Interest Rates on Hold

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The ECB today joined the Federal Reserve and the Bank of England in a unanimous decision to hold its benchmark deposit rate at 2.00%, where it has remained since June 2025. Analysts advise that policymakers will wait and assess the impact on growth and inflation as the Middle East conflict drags on. Experts suggest that the ECB is well ahead of its peers with inflation just about on target and with interest rates at 2.00%, which gives them headroom to adjust to on-going outside pressures.

The President of the ECB, Christine Lagarde, has said the ECB is well placed to handle war risks. She added, “We are both well positioned and equipped to deal with the development of a major shock that is unfolding and we are going to continue what we have been doing.” Analysts confirm that ECB appears to be in a better position than when Russia invaded Ukraine, and in response to reporter’s questions on the subject, she said, “In those four years, we have learned, we have improved our models, we have changed our strategy and we are now more attentive to risks around the outlook.” 

Inflation Risks and Economic Skew

Officials of the ECB noted that, “War will have a material impact on near-term inflation through higher energy prices. Its medium-term implications will depend both on the intensity and duration of the conflict and on how energy prices affect consumer prices and the economy.” President Lagarde also noted that inflation is somewhat skewed to the upside, whilst conversely risks for the economy are skewed to the downside. It is worth also noting that a spike in prices could be reinforced by disruption to global supply chains, faster wage growth and higher inflation expectations. 

Energy Security and Supply Chain Vulnerabilities

Analysts have warned that the ECB should not be too complacent in regard to potential energy shocks that could impact inflation, because if the war goes on for a few more weeks, there will be a scramble for LNG. Europe is at a seasonal low for gas storage, and with Asia struggling for gas supplies the result could be a head-to-head competition between Asia and Europe keeping prices elevated. Experts advise that even if the war ended tomorrow, it would take a long time to get supply chains back to normal. 

Market Forecasts and Inflation Swaps

Money markets have priced-in two full 25-basis point increases by the ECB by October this year, with the first rate increase expected sometime during the summer. Driven by surging energy costs, short-term inflation expectations have shifted sharply higher, with one-year euro inflation swaps* doubling to 4.00% today from sub-2.00% levels earlier this year. Policymakers at central banks around the world are expected to remain vigilant and the IMF (International Monetary Fund) have advised policymakers to stay nimble. 

*One-year Euro Inflation Swaps – An OTC (over-the -counter) derivative contract used to transfer risk, where one party pays a fixed rate (the swap rate) and the other party pays a floating rate linked to realised Eurozone inflation over a one-year period. These swaps are typically based on the Eurostat Harmonized Consumer Prices (HCIP)** excluding tobacco.

** HCIP (Eurostat Harmonized Consumer Prices excluding tobacco) – A specialised consumer price index (inflation measure) that covers all goods and services in the standard HCIPM basket excluding tobacco products, specifically targeting the removal of price changes relating to smoking. It acts as a sub-aggregate designed to measure inflation while excluding the direct, often policy-driven price fluctuations of tobacco. 

The Federal Reserve Keeps Interest Rates on Hold

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Today, the FOMC voted 11–1 to maintain its benchmark interest rate at 3.50%–3.75%, marking the second consecutive meeting of unchanged policy. The one dissenting vote came from Governor Stephen Miran, who called for a rate reduction of 25 basis points. Policymakers acknowledged that due to the Iranian conflict in the Middle East, they now face increased uncertainty on how this will impact the economy, with Chairman Powell stating in a post-meeting press conference, “The thing I really want to emphasise is that nobody knows.”

Inflation Outlook and Rate Cut Criteria

On the inflation front, officials have raised their outlook in 2026 from 2.40% to 2.70%, still above the Federal Reserve’s target of 2.00%, and analysts point to the fact that inflation figures have been above target for the last five years. Chairman Powell advised that they need to progress in reducing inflation in order to lower interest rates, saying that, “If we do not see that progress, then we won’t see the rate cut.” He went on to point to goods inflation that had increased due to tariffs, and indeed officials pointed to core inflation (excludes food and energy prices) which they also indicated will rise to 2.70%.

Energy Volatility and Meeting Deliberations

In the post-meeting press conference, Chairman Powell was questioned on rising oil prices. He noted that policymakers typically look through energy spikes, as such fluctuations often have only a transient impact on long-term inflation. The Chairman also advised that the possibility of a rate hike was discussed at some stage, but was quick to point out that most members of the FOMC did not see this as their base case. As usual, President Trump had called for a rate cut, but with the current events in the Middle East and current inflation figures, this seemed hardly likely to be on the FOMC’s agenda which of course was borne out by their vote. 

Market Expectations and the “Dot Plot”

Financial markets had priced in a near 100% bet that the FOMC would hold rates this time around. Currently, consensus pricing reflects a 94% to 95.7% probability of another hold at the upcoming April meeting. Experts suggest that money market sentiment will be only one more 25 basis points this year, most likely in either September or December. The FOMC uses the “Dot Plot”* as a major guide to future interest rate decisions, and currently analysts advise that consensus has shifted toward higher-for-longer with 14 of the 19  members now predicting no change or just one cut.

*Dot Plot – This is a chart that is published by the Federal Reserve that shows where each FOMC member expects interest rates to be in the future, with each dot representing one policymaker’s projection as to where the Federal Funds rate will be at the end of any given year, with the median dot receiving the most attention. Financial markets read and assess the implications of the dot chart and if the median dot shifts higher, then it may be interpreted as a hawkish stance. If it moves lower, it can be interpreted as a dovish stance. 

Leadership Succession and DOJ Investigation

Finally, and in a surprising statement regarding his immediate future, Chairman Jerome Powell stated that he had no intention of resigning as a member of the Federal Reserve’s Board of Governors until the investigation by the DOJ (Department of Justice) into the Fed’s building renovation is over. He went on to state that his Chairmanship ends this May, and if his already presidential nominated successor (Kevin Warsh) is not confirmed by the Senate by the end of his term, he will stay on as a chair pro tempore. In the past, the Federal Reserve has approved such a nomination. As one Senator has promised to withhold his vote until the DOJ investigation is dropped, no doubt this will increase President Trump’s angst towards Chairman Powell.

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