Two months ago, on February 28th the United States and Israel launched a major military campaign against Iran, which after thirty 39 days came to a halt (on 7th April 2026) so peace talks could take place in Islamabad, Pakistan. The US delegation to Islamabad was led by Vice President J.D. Vance who yesterday announced, after 21 hours of talks, that negotiations with the Iranians had sadly failed.
However, since the conflict began, Iran closed the Strait of Hormuz through which 20% of the world’s oil is shipped. During this time, the price of oil has shot up and down on the back of President Trump’s announcements, usually on his media outlet, Truth Social. Currently, jet fuel prices per the European Benchmark have more than doubled, rising from a pre-conflict price of $831/tonne to a closing price of $1,838/tonne on Friday, April 3rd. Similarly, the benchmark Brent Crude oil price has surged from approximately $70/bbl before the conflict to peaks exceeding $119/bbl. It currently sits at $102.22/bbl, following a closing price of $95.20/bbl on Friday the 26th.
Oil prices are now well above pre-conflict prices and as such, inflation is at the forefront of thoughts of policymakers at central banks across the globe. The recent failure of peace talks between Iran and the United States has resulted in the increased attention to inflation in the bond markets where, according to experts, the expectation is there will be no movement downward in interest rates but they will stay higher for longer. Many experts are suggesting that if the conflict carries on for much longer, and as increased energy prices are reflected in CPI (consumer price index), central banks may have to increase interest rates to battle rising inflation. Last week’s data released revealed that in the US there was the steepest advance in consumer prices for nearly four years.
However, last week a number of central banks had policy meetings where interest rates were kept on hold despite the conflict as can be seen below:
New Zealand
On Wednesday 8th April 2026, the MPC (Monetary Policy Committee) of the RBNZ (Royal Bank of New Zealand) kept the Benchmark OCR (Official Cash Rate) at 2.25% with officials noting, “If the increase in near term inflation is largely temporary, the committee envisages gradually moving the OCR to more neutral levels as activity recovers and near term inflation dissipates. However, any signs of significant second round inflation expectations would require decisive and timely increases in the OCR to re-anchor inflation expectations. The committee is vigilant to these risks”.
Local economists and analysts suggest that headline inflation will hit 4.50% by June/July this year, outstripping the RBNZ’s target of 1% – 3% for 2026. The Governor of the RBNZ, Anna Breman, said that the MPC had discussed the possibility of a “relatively early” increase in interest rates. However, she later advised that committee members were not close to enforcing such a measure at this time.
South Korea
On Friday 10th April 2026, the MPB (Monetary Policy Board) of the BOK (Bank of Korea), by a unanimous decision, held its Benchmark Seven-Day Repurchase Rate steady at 2.50%. The BOK Governor Rhee Chang Yong issued a warning that due to the United States/Iran conflict, inflation may outpace this year’s forecast as the economy is threatened with a bigger supply shock than was seen after Ukraine was invaded by Russia.
Governor Rhee warned that it was too early to make any substantial policy decisions and will hold off from adjusting rates whilst waiting to see if the supply shock proves temporary or not. Officials have advised that following the failure of US/Iran peace talks, the bank has adopted a cautious stance of monitoring whilst maintaining steady interest rates amid rising inflation and economic uncertainty.
Peru
On Thursday 9th April 2026, the Consejo de Politica Monetaria/MPC (Monetary Policy Committee) of the BCRP (The Central Reserve Bank of Peru) left its Benchmark Reference Interest Rate steady at 4.25% for the seventh straight month. Officials noted after the meeting, that policymakers were of the opinion that the previous month’s surge in inflation would only be of a temporary nature.
Officials went on to say, “it is projected that both year-on-year inflation and inflation excluding food and energy (underlying inflation) will return to the target range towards the end of the year and settle around 2.00% as the effects of supply shocks gradually dissipate”. Among emerging market economies, Peru has one of the lowest interest rates and despite on-going political turmoil enjoys one of the more stable economies and currencies amongst Latin American countries.
Kenya
On Wednesday April 8th 2026, the MPC (Monetary Policy Committee) of the CBK (Central Bank of Kenya) held their Benchmark Central Bank Interest Rate (CBR) at 8.75% finally ending a two year easing cycle. Analysts advise that the CBK’s mid-point target range for inflation is 5.00% and inflation currently remains below that figure, despite ticking up to 4.40%.
In a statement following the meeting, the Governor of CBK Kamau Thugge noted, “The conflict in the Middle East has disrupted global supply chains, leading to significantly higher energy prices and heightened risks to the global economic outlook”. The Governor also noted that likeminded central banks in the region (including South Africa) have paused monetary policy decisions whilst awaiting the outcome of the current Middle East conflict between Iran, the United States and Israel.
Governor Thugge went on to say that helped by appropriate monetary policy actions, inflation is expected to remain within the target range of 2.50% – 7.50%, and he further expected food prices to be stable due predicted good weather and a stable exchange rate. However, analysts warn that due to the consequences of the Iran/US conflict, prices of fuel and food may well rise, testing the upper limits of a 2.50% – 7.50% inflation band.
Romania
On Tuesday 7th April 2026, the NBR Board (Board of the National Bank of Romania – monetary policy committee) of the BNR (Banca Nationala a Romaniei) kept its Benchmark Monetary Policy Rate* on hold at, and for the thirteenth time since October 2024 , at 6.50%. Officials also advised that that the NBR had left unchanged the Deposit Facticity Rate**at 5.50% and the Lending Facility Rate*** at 7.50%
*Monetary Policy Rate – The main benchmark interest rate for 1-week repo operations which guides interbank market rates.
**Lending Facility Rate (Lombard) – The rate used by the central bank to provide overnight liquidity to banks.
***Deposit Facility Rate – The rate at which banks can deposit excess funds with the central bank
Officials noted after the meeting that, “ High uncertainties and risks to the outlook for economic activity, implicitly the medium-term inflation developments, arise however from the Middle East war and the on-going energy crisis, via the effects potentially exerted through multiple channels on consumer purchasing power, as well as firm’s activity and profits, also by affecting the dynamics of economies and inflation in Europe/Worldwide and the risk perception towards the region, with an impact on financing costs”. Put simply, along with many other central banks, rates are left on hold as the world awaits the outcome of the on-going crisis in the Middle East.
Analysts suggest, as does the above cross-section of central banks, that interest rates are being kept on hold until the on-going conflict between Iran/US becomes clearer. Or in some countries if inflation had spiked dramatically interest rates may well be increased. Financial markets are waiting to see what interest rate decisions will be made by the Federal Reserve, the BOE (Bank of England) and the ECB (European Central Bank) on 29th – 30th April 2026 respectively.
