President Trump's escalating threats against Iran have jolted global markets, pushing oil prices sharply higher as traders brace for potential conflict. The White House set a midnight deadline for Tehran to end its oil blockade of the Strait of Hormuz, a critical global oil chokepoint, or face crippling attacks on infrastructure. Brent crude surged past $111 a barrel, while West Texas Intermediate briefly topped $115, reflecting immediate market anxiety. The average US gasoline price jumped to $4.14 a gallon, with analysts warning it could exceed $5 if the strait doesn't reopen soon.

This conflict could significantly impact inflation, potentially driving the Consumer Price Index up 1% in the coming report, the largest monthly gain since 2022. Higher energy costs, alongside food and airfare, are major factors. The war's inflation impact is already forcing the Federal Reserve into a difficult position, with traders increasingly betting on zero rate cuts this year, down from two previously.

The Fed's divided stance, highlighted by Cleveland Fed President Beth Hammack's comments, could complicate matters if Trump's nominee Kevin Warsh is confirmed.