Inflation fears are currently sweeping across economies’ central banks following the Middle East crisis, which has seen oil prices rising above $100 per barrel.
Oil prices rose further above $100 a barrel Monday, and stocks fluctuated as the Iran war moved into a third week with both sides showing no sign of backing down and diplomats trying to ensure safe passage for tankers through the crucial Strait of Hormuz.
Crude shot up in the opening minutes after the US president said at the weekend that forces struck military targets on Kharg Island, a scrubby stretch of land in the Gulf that handles almost all of Iran’s oil exports.
He also warned attacks could expand to energy infrastructure if the Islamic Republic interferes with transit through Hormuz, which has been effectively closed since the US-Israel operations began on February 28.
Trump urged other countries to send warships to keep the waterway open, but offered no specifics or commitments from the US side, saying he hoped China, France, Japan, South Korea, and the UK would take part.
He later wrote Saturday in a Truth Social post: “The Countries of the World that receive Oil through the Hormuz Strait must take care of that passage, and we will help — A LOT!
“This should have always been a team effort, and now it will be.”
Trump said Tehran wanted a deal to end the fighting, but that he was not prepared to make one on current terms, without giving further details.
Both main crude contracts advanced. Brent shot up around three per cent to as high as $106.50 before paring the gains to about $104, while West Texas Intermediate sat just above $99.
Iran’s Foreign Minister Abbas Araghchi said his country was not interested in talks with Washington.
“We don’t see any reason why we should talk with Americans, because we were talking with them when they decided to attack us,” he told CBS’s “Face The Nation” in an interview aired Sunday.
“We never asked for a ceasefire, and we have never asked even for negotiation,” he added.
The two sides continued to exchange fire Monday, with Saudi Arabia saying it had intercepted more than 60 drones since midnight, while flights were temporarily suspended at Dubai’s airport after a “drone-related incident” sparked a fire nearby.
World’s central banks will meet this week facing renewed inflation threat from the war in Iran, and the possibility that they will be forced to delay interest rate cuts, and in some cases, consider hikes.
Nigeria
In Nigeria, the apex, Central Bank of Nigeria (CBN), which is expected to announce a new interest rate on Monday, March 16, has yet to issue any update as of the time of filing this report.
The apex bank trimmed its key interest rate by 50 bps to 26.50% during its February 2026 meeting, after keeping it unchanged at 27% in November.
This is as Nigeria’s annual inflation rate eased slightly to 15.10% in January 2026 from 15.15% in the prior month, marking the tenth consecutive monthly decline. This marked the lowest level since November 2020, partly due to a stronger currency reducing the cost of imports.
Food inflation, the largest component of the inflation basket, also continued to fall for the sixth month, reaching 8.89%, mainly on account of staples like cooking oil, grains, and vegetables amid ample supply.
However, with the global rising crude oil prices, markets are largely betting on policymakers turning hawkish, suggesting higher-for-longer rates that could also hit developing countries, including Nigeria, that borrow in Western currencies in order to lure international investors.
Global central banks, from Washington to London to Jakarta, are expected to conduct their first assessments of the economic damage after more than two weeks of conflict between the US and Iran.
Decisions expected, covering all members of the Group of Seven and eight regions among the world’s 10 most-traded currencies, are likely to confirm to investors that the specter of a new inflation shock has become concerning enough to push monetary policymakers toward greater caution.
Bloomberg Economics View:
“For the Federal Reserve, a lot depends on how the conflict evolves. If the war ends quickly, we expect unemployment to rise slightly and core inflation to slow, allowing interest rates to be cut by about 100 basis points this year. If the conflict drags on, with energy prices remaining elevated and inflation expectations rising, the calculations will become much more difficult.” — Eliza Winger and Anna Wong, economists.
The Iran war marks the second time in just over a year that policies by US President Donald Trump have unsettled global central banks, following the tariffs he launched on “Liberation Day” in April aimed at reshaping global trade. That uncertainty and risk are likely to test the nerves of monetary policymakers in the coming months.
Below is a closer look at the monetary policy decisions expected:
US Federal Reserve
The Federal Reserve is widely expected to do what had been anticipated weeks before the March 17–18 policy meeting: keep interest rates unchanged.
In recent days, however, expectations that rates would remain unchanged for months have been shaken by renewed disruptions in the labor market and by the war in the Middle East, which has pushed oil prices higher.
This combination puts the Fed’s dual mandate in conflict, casting a cloud over the outlook for interest rates, at least in the near term.
Dollar rally bets reach highest level since 2022 as oil rises
Market expectations: Money markets point to a 90 per cent probability of a quarter-percentage-point rate cut in 2026, most likely starting in September.
On Wednesday morning, while Fed officials are still meeting, the government will release another piece of the US inflation puzzle with the February Producer Price Index. Economists expect a smaller increase in wholesale costs compared with January, when service prices jumped.
Additional economic data expected next week includes February industrial production and January new home sales.
European Central Bank
Officials in Frankfurt are widely expected to keep the deposit rate unchanged on Thursday. However, the Middle East crisis has largely overturned the “good place” that President of the European Central Bank, Christine Lagarde, and her colleagues previously said monetary policy was in.
Rising energy prices, which have prompted bets on rate increases, leave the Governing Council with the task of explaining how inflation risks have changed, while also signaling how close they are to meeting market expectations.
Investors have focused on similarities between the current energy shock and the 2022 crisis following Russia’s invasion of Ukraine, when the European Central Bank stood out for strongly resisting market pressure to raise rates. While the bank will try to avoid repeating its mistakes, it is also unlikely to rush into raising rates.
Market expectations: After recently pointing to a year-long hold in rates, traders now bet that the European Central Bank will raise rates at least once in 2026. A quarter-point increase starting in July is fully priced in, while swaps suggest a 70 percent probability of a second increase by the end of the year.
Bank Of Japan
The Bank of Japan is widely expected to keep its benchmark rate unchanged on Thursday while reassuring markets that it remains on track to normalize monetary policy.
Governor Kazuo Ueda is likely to stress the need to closely monitor developments given the country’s heavy reliance on oil imports from the Middle East.
While persistently high oil prices could harm Japan’s economy, they would also add inflationary pressure. Policymakers must also evaluate the risk of further yen weakness if they adopt an overly dovish tone. The currency fell on Friday to its lowest level against the dollar since 2024.
Market expectations: Traders favor a quarter-point increase by July and price in a 90 per cent probability of a second increase by December.
Bank Of England
The decision, which only last month appeared “50-50” between a cut or a hold, according to Governor Andrew Bailey, is now heavily expected to result in rates being kept unchanged on Thursday.
Economists at ING and RSM UK see inflation potentially rising to more than double the Bank of England’s 2 percent target if the recent surge in oil and gas costs proves persistent.
These risks are pushing officials toward greater caution on consumer prices, despite signs of slowing growth even before the current energy shock. Data released Friday showed the British economy unexpectedly failed to grow in January, threatening to leave first-quarter gross domestic product growth below the bank’s 0.3 per cent forecast.
Market expectations: Money markets see a 60 per cent probability of a rate increase in 2026, most likely starting in July. Before the US and Israeli strikes on Iran and the subsequent rise in oil prices, markets had priced in two quarter-point cuts by year-end.
Bank Of Canada
February inflation data, due two days before the Bank of Canada’s decision on Wednesday, will give policymakers a key read on price pressures before the Middle East war pushed oil prices higher.
Officials are also weighing Friday’s data showing the economy lost jobs in February at the fastest monthly pace in more than four years.
With headline inflation still close to the central bank’s 2 per cent target, markets expect policymakers to keep the policy rate at 2.25 per cent on Wednesday, while investors await Governor Tiff Macklem’s press conference to see how the Iran crisis may affect the outlook.
Market expectations: Money markets fully price in a quarter-point rate increase in October.
Swiss National Bank
The central bank’s insistence on restraining the franc, which has reached its strongest level against the euro in a decade, will face intense scrutiny at the first quarterly decision of the year on Thursday after Swiss policymakers broke their usual silence to signal a greater willingness to intervene.
While any change in the bank’s language on the currency market would be notable, economists broadly expect interest rates to remain at zero, meaning the current stage does not call for a return to the more extreme and economically damaging option of negative rates.
Swiss National Bank officials focus on the franc because its strength already pressures weak inflation by lowering import costs. However, higher oil prices could generate some increase in prices, easing pressure on them to act.
Market expectations: Swaps suggest an 85 per cent probability of a rate increase in 2026 starting in September.
Swedish Central Bank
Sweden’s central bank is widely expected to keep the benchmark rate unchanged at 1.75 per cent on Thursday, in line with previous signals, as the economy continues to recover while inflation falls below the 2 per cent target.
New economic forecasts and the updated rate path will be in focus as investors try to determine whether Middle East disruptions have prompted policymakers to revise their view that the next step would be a rate increase next year.
Market expectations: Traders see a 50 per cent probability of a quarter-point rate increase starting in June.
Reserve Bank Of Australia
Australian policymakers are scheduled to set interest rates on Tuesday, currently at 3.85 per cent, and markets see a strong probability of a second increase.
The Reserve Bank of Australia last month became the first major central bank among advanced economies to raise borrowing costs this year, citing stubborn price pressures and excess demand in a supply-constrained economy.
Since then, data has confirmed economic resilience, while the Iran war has intensified concerns about domestic price pressures.
Officials face a difficult task in assessing whether another rate increase would strengthen credibility or risk tightening policy in an increasingly uncertain global environment. Markets will closely examine the post-meeting statement and Governor Michele Bullock’s press conference for clues about whether February marked the beginning of a new tightening phase.
Market expectations: Money markets lean toward expecting three additional rate increases in 2026, starting with Tuesday’s meeting.
Brazil
Before the outbreak of the Iran war, Brazil’s central bank was almost certain to begin a monetary easing cycle. Policymakers in January indicated that a March cut was their baseline scenario, while slowing inflation and declining expectations gave them ample room to maneuver.
But instead of a half-percentage-point cut as many analysts expected, consensus now leans toward only a quarter-point reduction, while some observers see the possibility that the board could opt for caution and keep the rate unchanged at 15 per cent.
Bank Indonesia
Indonesia’s central bank in Jakarta is widely expected to keep the policy rate unchanged at 4.75 per cent on Tuesday, a decision that will force officials to balance the stability of the rupiah against renewed concerns about consumer prices.
While fuel subsidies may ease the acceleration in inflation, such measures could widen the deficit amid rising fiscal concerns, potentially driving further capital outflows and undermining efforts to stabilise the currency.
Bank Of Russia
Bank of Russia officials will consider on Friday whether inflation caused by the increase in value-added tax is slowing enough to allow a seventh consecutive cut in the key interest rate.
Policymakers have lowered rates by 50 basis points at each of the past three meetings, with their decision coming just before the release of February consumer price data.
Upcoming Decisions:
Tuesday
Morocco’s king is expected to appoint a new central bank governor ahead of the quarterly rate decision. The bank is likely to keep rates unchanged while policymakers monitor the impact of the Iran war on inflation.
Wednesday
Iceland’s central bank is expected to raise interest rates by a quarter percentage point to 7.5 per cent, reversing the easing path that began in 2024 as inflation remained at 5.2 per cent amid rising oil prices.
After four major cuts since July that reduced Ghana’s benchmark rate by 12.5 percentage points to 15.5 per cent, the central bank may slow the pace of easing or pause reductions as it assesses the war’s impact on inflation.
Thursday
Policymakers in the Czech Republic are also expected to keep borrowing costs unchanged, with developments related to Iran likely adding further arguments for that decision.
Ukraine’s central bank is also expected to leave policy unchanged after cutting rates in January.
Taiwan’s economy has received support from strong global demand for artificial-intelligence-related technology products, but the central bank is unlikely to raise rates for now after inflation remained below 2 per cent in recent months.
Friday
Paraguay’s central bank faces a relatively unusual situation: inflation has slowed for six consecutive months to 2.3 per cent, well below its 3.5 per cent target. Successive rate cuts have reduced borrowing costs to 5.5 per cent.
