Yardeni: Iran Crisis Reignites, Inflation and Fed Rate Hike Expectations Back on the Table
Taylor Wilson
Strategist Ed Yardeni warns the collapse of the US-Iran ceasefire could push oil higher and reignite inflation, forcing the Fed back into rate hikes — markets already price in more than one hike by year-end, with Brent briefly topping $79.
Why did the ceasefire suddenly "collapse"?
Trump warned the interim US-Iran ceasefire deal "may be over." The US then launched fresh strikes on Iran and revoked the waiver that had allowed Iranian oil sales.
Iran responded that the strikes and oil blockade have rendered last month's temporary peace deal "void."
This means → The two pillars holding oil prices down — the ceasefire and the waiver — vanished at once. Oil has lost its ceiling.
How far has oil moved, and what does the consumer feel?
Brent crude rose above $79 a barrel intraday, hitting a two-week high. Global equities fell; US Treasury yields touched session highs.
The US gasoline roller-coaster: below $3 per gallon before the Feb 28 strikes → peaked above $4.56 in May → pulled back about 17% to $3.79 as of Monday.
In plain terms = Gas prices had just started to ease. Another oil spike would snatch that relief away almost immediately.
Why is the Fed being "dragged back in"?
Yardeni sees an emerging consensus inside the Fed: "Price stability matters far more than the labor market."
US CPI climbed to a three-year high in May, partly reflecting sustained energy-price pressure.
This means → The Fed has traditionally dismissed energy-price swings as transitory. But if oil stays elevated and bleeds into core inflation — the price gauge that strips out food and energy — that excuse stops working.
What is the market betting on?
Bloomberg data show traders have ramped up bets on Fed hikes this year; markets now price in more than one rate increase by year-end.
Yardeni calls the situation "a geopolitical crisis that just won't dissipate, won't end," adding: "In a way, we're back to square one — back to where we were in March."
This reflects a fundamental shift in market anxiety — from "will they cut or hold?" to "do they need to hike again?" The wind has reversed entirely.
Content is for reference only, not financial advice.