Oil: Middle East tensions revive inflation channel – BNY

BNY reports that renewed Iranian–U.S. hostilities lifted Brent above 3%, reviving the inflation channel but remaining secondary to Fed and AI valuation drivers. The bank notes the U.S. interception of Iranian missiles and retaliatory strikes, but argues these Oil price moves are unlikely to materially affect today’s Fed decision, keeping focus on policy and risk assets.

Geopolitical flare-up lifts Brent prices

"The brief pause in hostilities has ended. Iran launched missiles toward U.S. forces in Jordan, while U.S. and Saudi forces struck Iran-backed militias in Iraq. Brent rose more than 3%, reviving the inflation channel."

"The move is unhelpful but remains secondary for sentiment: the dominant drivers are now the Fed, AI valuations, and positioning rather than geopolitics alone."

"The U.S. said it intercepted an Iranian ballistic missile attack on military bases in the Middle East, ending a brief lull and heightening the risk of renewed escalation. Oil prices have reacted, but we don’t see the moves materially affecting today’s Fed decision."

"U.S. Central Command said IRGC forces launched multiple missiles from Iran in a surprise attack, all of which were intercepted, while U.S. and Saudi forces also struck Iran-backed militants in Iraq after 30 drone attacks in the prior 72 hours."

"Iran’s state media said the IRGC fired missiles at a U.S. airbase and command center in response to U.S. actions. President Trump said diplomacy with Tehran may still progress, but reiterated threats of force."