Even though markets continue to price in interest rate cuts in 2026, the rise in oil prices associated with the bombings of Iran — even if temporary — tends to make the currently expected reduction in the policy rate much less likely. Evidence of persistent inflationary pressures was already emerging due to labor cost dynamics and the interruption of the oil price decline cycle that had been in place since 2023. Added to these factors now is the possibility of an increase in costs associated with fuels and other petroleum-derived products. Even if not very persistent, it would definitely challenge inflation convergence to the target.
The U.S. attack on Iran now emerges as the main geopolitical risk factor. It is possible that, after a few weeks of conflict and higher oil prices, the situation will normalize. However, the risk has clearly increased, and the outlook must now incorporate a shock—albeit temporary—to global fuel prices.
