Analysis: The Fed Faces Challenges, Rising Oil Prices May Disrupt Expectations of U.S. Inflation Decline

Odaily News As the conflict between the U.S., Israel, and Iran approaches one month, shipping through the Strait of Hormuz remains persistently obstructed, disrupting the global energy supply system and sending international oil prices soaring. Firstly, global inflation faces a comprehensive rebound, as rising oil prices transmit throughout the entire industrial chain. Costs across all sectors, including energy, food, transportation, and chemicals, will surge sharply. Economies like Europe, Japan, and India, which are highly dependent on energy imports, will face even more severe pressure. While the U.S. is a net energy exporter, inflation stickiness may become completely entrenched, and the Federal Reserve's monetary policy could be caught in a dilemma. Currently, the average U.S. gasoline price has surged over 30% within three weeks. High oil prices directly reverse the previous trend of declining inflation and will also completely overturn market expectations for interest rate cuts.

A prolonged high-interest-rate environment will directly suppress the U.S. real estate market, corporate financing, stock market valuations, and more. This is particularly significant as this year is a U.S. midterm election year, and gasoline prices are among the most sensitive livelihood indicators for American voters. For global economic growth, a slowdown is likely. High oil prices directly erode household disposable income, squeeze non-energy consumption, and simultaneously raise corporate production costs. (Jin10)