The temporary peace agreement between the United States and Iran did not allay major central banks’ concerns about inflation, as global monetary institutions are still adopting a cautious approach that tends to tighten monetary policy in the face of ongoing price pressures, especially those associated with turmoil in energy markets over the past months.
Economists believe that the damage caused by the conflict in the energy sector and the depletion of global oil reserves will make the process of restoring balance in the markets slow, even with the continued calm between Washington and Tehran, which will keep the risks of inflation present during the coming period.
In the United States, the Federal Reserve kept interest rates unchanged during its last meeting, but sent clear signals about the possibility of raising them later this year, in the first monetary policy meeting chaired by Kevin Warsh. The Bank of England also discussed the possibility of tightening monetary policy, while the European Central Bank and the Bank of Japan took actual steps in this direction during the past weeks.
This shift led to a noticeable change in financial market expectations, after investors moved from betting on a US interest rate cut in 2026 to expecting two possible increases in interest rates, which contributed to tightening financial conditions even before any new decisions were implemented.
Dario Perkins, an economist at TS Lombard, said that reopening the Strait of Hormuz may suggest an easing of the pressures that prompted central banks to raise interest rates, but core inflation remains high, while expectations indicate an improvement in economic growth, which may support continued monetary tightening.
In turn, Stephen Brown, chief economist at Capital Economics, considered that the Federal Reserve has become more inclined to raise interest rates, indicating that the current inflation path justifies adopting a more stringent policy during the next stage.
Despite the decline in oil prices following the announcement of the US-Iranian agreement, the markets are still dealing with caution regarding the recent developments. Brent crude prices are moving near $77 per barrel, while futures contracts maintain close levels, reflecting investors’ doubts about the speed of returning full stability to the global energy market.
Analysts warn that the effects of tight US monetary policy will not be limited to the United States, but will extend to other economies. In Japan, the weak yen has returned to the forefront of discussion, increasing pressure on the Bank of Japan to continue raising interest rates. As for Europe, despite the Bank of England fixing the interest rate, discussions within the Monetary Policy Committee showed an increasing tendency towards tightening, while the European Central Bank and the Norwegian Central Bank confirmed that inflation risks are still high and that the door remains open to further raising interest rates if economic conditions require it.
