Iran War May Mean 'Fewer' Fed Rate Cuts This Year, Wells Fargo Says

12:08 PM EDT, 03/09/2026 (MT Newswires) -- The Federal Reserve may deliver "fewer" interest rate cuts this year amid fears that the ongoing Middle East conflict could drive inflation higher, Wells Fargo Investment Institute said in a report on Monday.

The US-Israel war against Iran entered its 10th day, with no signs of de-escalation.

Crude oil prices soared past $100 a barrel on Monday as Middle Eastern producers cut output amid the closure of the vital Strait of Hormuz.

"We have been expecting a pair of quarter-point interest rate cuts, but the risk now is for fewer 2026 rate cuts," Wells Fargo said.

The firm expects a "modest" bump in US consumer inflation as it anticipates energy supply disruptions in the Gulf to be temporary.

On Friday, official data showed that US employment unexpectedly fell in February and the jobless rate ticked higher to 4.4%. On the same day, Cleveland Fed President Beth Hammack and her Boston Fed counterpart, Susan Collins, said the Fed should hold its monetary policy steady for "some time" as it seeks evidence that inflation is cooling.

"The Labor Department's February jobs report showed weak employment growth in the same week that a new war poses the risk of an inflation bump with uncertain time," the Wells Fargo report said.

Markets widely expect the Federal Open Market Committee to leave interest rates unchanged at 3.50% to 3.75% for a second consecutive meeting next week, according to the CME FedWatch tool. After delivering three back-to-back 25-basis-point rate cuts last year, the FOMC paused in January, citing stabilization in the labor market and elevated inflation.

While the duration of the conflict remains uncertain, the firm said that the impact of tight oil supplies on the US economy appears to be limited.

"The US is well supplied with oil and natural gas and likely will see higher energy prices and some transient inflation but not suffer a slower economy," Wells Fargo said.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.