David McNamara: Middle East conflict raises inflation, reshaping central bank policy for 2026

The Iran conflict fuels energy market uncertainty, forcing central banks to reassess 2026 inflation and interest rate forecasts

Interest rate expectations have risen in response to the conflict, as the risk of another inflation shock emerges due to higher energy prices. Picture: AP/Vahid Salemi

The ongoing conflict in the Middle East and its impact on energy markets raises significant uncertainty in the outlook for inflation and growth in 2026. 

However, it should be said the current shock, so far, is not near that experienced in 2022 following the invasion of Ukraine in terms of energy price levels and prevailing economic conditions.