New York Federal Reserve President John Williams has stated that the ongoing conflict in the Middle East is contributing to higher US inflation through increased energy costs. He pointed out that the war between the US and Israel against Iran is driving up oil prices, which will directly impact headline inflation figures. Williams noted that while monetary policy is currently positioned to handle this shock, the near-term outlook suggests inflation could temporarily exceed 3%.
During a Bloomberg interview, Williams explained that energy price spikes are a direct component of headline inflation, and he anticipates inflation to remain elevated through mid-year, ending around 2.75% in 2026. He stressed that the energy shock, though significant in the short run, is expected to be temporary. However, he acknowledged that uncertainty surrounding the conflict limits the Federal Reserve’s ability to provide clear guidance.
The conflict’s impact on oil markets has been severe, with Brent crude trading above $100 per barrel due to disruptions in the Strait of Hormuz, which handles about 20% of global supply. This has fueled inflation fears that have weighed on the cryptocurrency market, which saw its total capitalization decline as Bitcoin fell below $70,000 and major altcoins like Ethereum, BNB, XRP, Solana, and Dogecoin posted losses of 2% to 4%.
Economists now expect monthly US CPI prints as high as 0.9% year-on-month, driven largely by double-digit jumps in energy costs. The Federal Reserve has kept rates at 3.50%–3.75% and signaled that oil-driven inflation could keep the PCE index near 3%. Williams’s comments align with those of other Fed officials, such as Governor Christopher Waller, who warned that fresh rate hikes might be necessary if inflation does not subside, and Chicago Fed President Austan Goolsbee, who suggested rate cuts may be delayed until 2027.