It is no secret that the conflict in Iran is putting upward pressure on oil prices and inflation, even in nations that are major energy producers such as the US. Last week’s US inflation figures were a case in point as US headline inflation jumped from 2.4% to 3.3% in March, largely due to a sharp rise in the energy CPI. The energy CPI was 12.5% higher than it was a year ago. This is not an unprecedented rise, but further increases in the coming months look likely, especially if the temporary ceasefire between the US and Iran does not hold. In such a scenario, incoming Fed Chair Kevin Warsh will have a hard job convincing other FOMC members, and investors, that rate cuts are warranted, assuming his nomination is confirmed. After all, the Fed was behind the curve during and after COVID, which contributed to the inflation problem back then and the committee will be keen not to make such a mistake this time round. But one major difference is that the US labour market is a lot softer now than it was in 2022, reflected by falling US wage growth in March. That may give Warsh the evidence he needs to push for looser policy later this year, but it is not clear whether the rest of the FOMC would agree.