By Chelsey Dulaney

Financial markets have fully abandoned bets on rate cuts from the Federal Reserve this year, with the war in the Middle East set to drive up inflation.

Derivatives markets show zero odds of a rate cut this year, down from 1.3% on Thursday, according to CME Group data. Markets are pricing a 54% chance of at least one hike.

The energy price shock unleashed by the conflict has dramatically altered the outlook for central banks around the world, which now face both higher inflation and slower growth. As disruptions to energy markets grow, so do the risks that inflation pressure spill over into broader price pressures.

A month ago, just before the conflict broke out, investors were betting on two to three reductions this year. At the Fed's meeting last week, most officials were still penciling in a quarter-point cut this year.

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(END) Dow Jones Newswires

March 27, 2026 06:49 ET (10:49 GMT)

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