One hundred days into the Iran war, the world's two most influential English-speaking central banks — the US Federal Reserve (Fed) and the Bank of England (BoE) — are holding their monetary policy cards extremely close to their chests. Despite growing market pressure for interest rate cuts and mounting evidence of economic slowdown in both the United States and the United Kingdom, policymakers at both institutions are maintaining a deliberately guarded and data-dependent posture — unwilling to commit to a clear rate path while the geopolitical and inflationary consequences of the ongoing conflict in the Middle East remain deeply uncertain.

The Iran war — now entering its fourth month — has fundamentally complicated the monetary policy calculus for central bankers on both sides of the Atlantic, injecting a layer of geopolitical uncertainty into inflation forecasting, energy price modeling, and growth projections that simply cannot be resolved through traditional economic analysis alone.

How 100 Days of War Has Reshaped the Economic Landscape

When the Iran conflict first erupted, global financial markets initially reacted with the sharp but typically short-lived volatility that characterizes geopolitical shock events. But 100 days of sustained conflict have produced something far more consequential than a temporary market disruption — they have structurally altered several key economic variables that central banks rely on to set monetary policy:

  • Energy Price Volatility: The conflict's impact on Middle East oil supply routes — particularly fears around the Strait of Hormuz — has kept global crude oil prices in a state of elevated and unpredictable volatility. Oil prices that swing dramatically week to week make it extraordinarily difficult for central banks to model near-term inflation trajectories with any confidence. A surprise oil price spike could reignite inflationary pressures that the Fed and BoE have spent the past two years painstakingly suppressing through aggressive rate hike cycles.
  • Supply Chain Disruptions: The Iran war has compounded already-fragile global supply chains, with shipping companies rerouting vessels away from Middle Eastern waters, driving up freight costs and extending delivery times for goods moving between Asia, Europe, and North America. These secondary supply chain effects are feeding through into producer price indices and threatening to translate into renewed consumer price inflation in the months ahead.
  • Natural Gas Market Stress: The UK is particularly exposed to natural gas price volatility given its historical dependence on LNG (Liquefied Natural Gas) imports that transit through or originate in the broader Middle East region. The Bank of England is acutely aware that an escalation in the Iran conflict could trigger a natural gas price surge that would hit British households with a new round of energy bill shocks — precisely the scenario that drove UK inflation to a 40-year high in 2022-2023.
  • Consumer and Business Confidence: Extended geopolitical uncertainty tends to suppress both consumer spending and business investment as households and companies defer major financial decisions until the outlook becomes clearer. Both the US and UK economies are showing early signs of this confidence erosion effect — with retail sales data softening and capital expenditure plans being delayed across multiple sectors.

The Federal Reserve: Caught Between Inflation Risk and Growth Fears

For the US Federal Reserve, the 100-day mark of the Iran war finds policymakers navigating an extraordinarily uncomfortable economic crossroads. On one side lies the persistent risk that energy-driven inflation could re-accelerate — forcing the Fed to maintain or even raise interest rates at a time when the US economy is showing clear signs of cooling. On the other side lies the growing risk of a demand-driven recession triggered by prolonged high borrowing costs compressing consumer spending, housing activity, and business investment.

Fed Chair Jerome Powell and his colleagues on the Federal Open Market Committee (FOMC) have consistently emphasized their commitment to a "data-dependent" approach — meaning they will not commit to rate cuts until they have high confidence that inflation is durably returning to the 2% target. The Iran war has made that confidence genuinely elusive, as the monthly CPI and PCE inflation readings that the Fed watches most closely are being distorted by war-driven energy price swings that may or may not prove temporary.

Key concerns preoccupying Fed policymakers at the 100-day mark include:

  • Core vs. Headline Inflation Divergence: Headline inflation — which includes volatile food and energy components — is being directly elevated by war-driven oil prices. Core inflation, which strips these out, has been more subdued. But the Fed cannot simply ignore headline inflation indefinitely if energy prices remain structurally elevated due to prolonged conflict.
  • Labor Market Resilience: The US labor market has remained surprisingly robust despite the geopolitical headwinds — with unemployment staying near historic lows and wage growth remaining above the level consistent with 2% inflation. A still-tight labor market reduces the Fed's urgency to cut rates as an economic stimulus measure.
  • War Duration Uncertainty: The Fed's models are built around relatively predictable economic variables. A geopolitical conflict of uncertain duration and unpredictable escalation potential introduces a degree of scenario uncertainty that standard monetary policy frameworks are not well-equipped to handle — leading Fed officials to default to a posture of patient observation over proactive policy adjustment.

Market participants tracking the Fed's evolving position on rate cuts can follow real-time policy signals and official statements through the Federal Reserve's official website, which publishes FOMC meeting minutes, economic projections, and Chair Powell's press conference transcripts in full.

The Bank of England: A Different Crisis, Similar Caution

Across the Atlantic, the Bank of England faces a parallel but distinctly British version of the same dilemma. The UK economy enters the 100-day war anniversary in a particularly vulnerable position — still wrestling with structurally higher inflation than its G7 peers, a stagnating growth outlook, and a housing market under severe stress from the prolonged high interest rate environment.

BoE Governor Andrew Bailey and the Monetary Policy Committee (MPC) have been navigating calls for faster rate cuts from business groups, mortgage holders, and opposition politicians — but have consistently resisted moving faster than the data justifies. The Iran war has given the MPC additional justification for its cautious stance, providing a concrete geopolitical rationale for maintaining a "higher for longer" interest rate posture even as domestic growth signals deteriorate.

Specific Bank of England concerns at the 100-day mark include:

  • UK Services Inflation Persistence: Unlike the US, where goods inflation has largely normalized, the UK continues to experience stubbornly elevated services sector inflation — driven by wage growth in healthcare, education, hospitality, and professional services. This domestic inflation dynamic makes the BoE reluctant to cut rates aggressively even as goods prices moderate.
  • Sterling Vulnerability: An aggressive Bank of England rate cutting cycle — if not matched by equivalent Fed easing — risks weakening the British pound significantly against the US dollar, which would automatically import inflation into the UK through higher import costs. The Iran war's impact on the USD's safe-haven demand makes this currency dynamic particularly complex to manage.
  • Energy Import Exposure: The United Kingdom imports a significant portion of its energy needs and remains exposed to global LNG price shocks linked to Middle East supply disruptions. The BoE is keenly aware that a second energy price shock — triggered by an escalation in the Iran conflict — could require a reversal of any rate cuts already implemented, creating damaging policy whiplash that would undermine central bank credibility.

What Markets Are Pricing In — And Where They May Be Wrong

Financial markets have been in a constant state of recalibration regarding Fed and BoE rate cut expectations since the Iran war began. At the outset of the conflict, traders were pricing in aggressive easing cycles for both central banks through 2025. But 100 days of war-driven economic complexity have forced a substantial repricing of those expectations:

  • Fed Funds Futures: Markets have progressively pushed back their expected timeline for the first Fed rate cut and reduced their forecast for the total number of cuts in 2025 — from five or six cuts at the start of the year to two or three cuts as of the latest futures pricing.
  • UK SONIA Swaps: Similarly, Bank of England rate cut expectations have been trimmed, with the market now pricing a more gradual easing cycle than previously anticipated — reflecting the BoE's own guidance that it will not rush to cut rates while war-driven inflation risks remain elevated.

The key risk for markets is that they are still underestimating how long the Iran war's inflationary effects could persist — and therefore overestimating the pace and depth of rate cuts that the Fed and BoE will actually deliver in the months ahead. A prolonged conflict that keeps oil prices structurally elevated could force both central banks to maintain restrictive monetary policy well into 2026 — a scenario that bond markets and equity valuations have not yet fully priced.

The Broader Monetary Policy Dilemma: Stagflation Risk Returns

Perhaps the most alarming dimension of the Fed and BoE's current predicament is the re-emergence of stagflation risk — the toxic combination of high inflation and low economic growth that plagued Western economies in the 1970s and proved extraordinarily difficult for monetary policy to address without causing severe recessions.

If the Iran war continues to suppress global growth through geopolitical uncertainty, supply chain disruption, and confidence erosion — while simultaneously keeping energy-driven inflation elevated — both the Fed and the BoE could find themselves in the classic stagflation trap: unable to cut rates without reigniting inflation, and unable to raise rates without crushing an already-weakening economy.

This is the nightmare scenario that is keeping central bankers in Washington and London awake at night — and it explains why, at the 100-day mark of the Iran war, both institutions are choosing extreme caution over decisive action.

The Bottom Line

The Federal Reserve and the Bank of England's guarded stance after 100 days of the Iran war reflects not indecision but rather a sober and disciplined recognition that monetary policy cannot resolve geopolitical uncertainty — it can only respond to its economic consequences as they materialize in the data.

For businesses, borrowers, investors, and households on both sides of the Atlantic, the central banks' message is consistent and clear: do not expect rapid rate relief while the Iran war continues to cloud the global economic outlook. The path to lower interest rates runs through a resolution — or at least a stabilization — of the Middle East conflict, and until that happens, both the Fed and the BoE will remain firmly in wait-and-watch mode.