Morgan Stanley economists warn that the Federal Reserve may delay its next interest rate cut due to the oil-price shock triggered by the Iran war. The investment bank had previously expected the central bank to resume cutting rates as early as June, but now sees a significant risk that geopolitical tensions could push back this timeline.

The oil market has experienced substantial volatility following the conflict, with crude prices spiking as supply concerns mount. This inflationary pressure complicates the Fed's monetary policy calculations, as higher energy costs could force policymakers to maintain higher rates longer than anticipated to control inflation. Morgan Stanley's revised outlook reflects growing uncertainty about the economic impact of sustained high oil prices.

For investors, this means the anticipated rate cut cycle may not materialize as quickly as markets had priced in. The potential delay could affect everything from bond yields to equity valuations, particularly in interest-rate-sensitive sectors. The Fed will need to balance its inflation-fighting mandate against economic growth concerns as it monitors both energy markets and geopolitical developments.