Financial Leaders Warn of Delayed Fed Rate Cuts Due to Iran Conflict

Major financial institutions and investment leaders warn that the Federal Reserve System may delay interest rate cuts or even raise rates due to an energy price shock caused by Iran closing the Strait of Hormuz. The geopolitical crisis has pushed Brent crude prices from the low $70s to nearly $100 per barrel and drove the personal consumption expenditures index to 3.5% in March, the highest level in nearly three years.

Goldman Sachs and BofA Global Research have both pushed back their rate cut forecasts. Goldman Sachs now predicts cuts in December 2026 and March 2027, citing a resilient labor market and expectations that core inflation will hover near 3% throughout 2026. BofA Global Research expects rates to remain steady for the rest of the year, with two 25-basis-point cuts not arriving until July and September 2027.

These revisions follow an April 29 Federal Reserve meeting where the federal funds rate was held at 3.50% to 3.75% in a divisive 8-4 vote, the narrowest split in decades. At the Milken Institute conference, leaders from Pimco and Franklin Templeton argued that cuts would be counter-productive under current dynamics. Analysts suggest the Federal Open Market Committee may remove its easing bias during the June meeting as hawkish views gain influence.