That's because a sustained surge in oil prices stemming from US involvement in the Israel-Iran conflict could complicate the outlook for inflation.

The Fed has held rates steady all year, to the dismay of the president, who has demand that borrowing costs come down. Trump threatened to fire Fed Chair Jerome Powell earlier this year before backing down as markets balked at the idea. Others in the administration have also piled on, blaming the central bank for things like the housing supply crunch.

Powell, for his part, insists that the central bank is taking a cautious but appropriate approach while officials wait to see how tariffs and other policies impact inflation.

Now, oil could be yet another wrinkle in the Fed's forecast.

Brent crude, the international benchmark, was about $76 a barrel on Monday after the US targeted three of Iran's nuclear facilities. The international oil benchmark is up 14% from its price on June 12, and around 26% higher since its most recent low in May.

West Texas Intermediate crude traded as high as $74 a barrel, up 9% since June 12 and up 30% from the low last month.

Prior to the Israel-Iran escalation, oil prices had been trending lower for most of 2025, contributing to much of the decrease in inflation.

Energy was the only category in the consumer price index that saw an unadjusted decrease in the last 12 months leading up to May, according to the Bureau of Labor Statistics. Energy commodity prices were down 11.6% that month compared to last year, and gasoline prices were down 12%.

Observers on Wall Street are eyeing the risks to inflation from the conflict.

"The eruption of fresh hostilities in the Middle East adds to the case for a drift higher in the term premium over this decade," economists at TS Lombard wrote in a note last week, though the firm said that the shock to oil prices likely wouldn't be enough to meaningfully sway inflation in major economies.

"The worry comes from the number of different negative supply shocks potentially hitting the US economy at the same time," the firm added, pointing to price increases stemming from Trump's tariffs and the potential inflationary impact of migrant deportations.