Calm returned to Wall Street, and U.S. stocks rallied, while oil prices gave back some of their initial spurts following Israel’s attack on Iranian nuclear and military targets at the end of last week.

A sustained surge in oil prices is likely to complicate the U.S. fight against inflation. A $10-a-barrel increase would boost year-over-year growth in the Consumer Price Index by 0.5 percentage points,

Brits have been warned that the conflict between Israel and Iran could have major implications for energy bills and inflation.

"A sustained $10 increase in oil prices is expected to increase inflation by 0.4% and lower GDP by 0.4%": Apollo Global Management 's ( APO -4.34%) chief economist Torston Slok says oil is fueling U.S. stagflation fears, adding to the effect expected from import tariffs.

Despite high inflation expectations, price pressures have steadily cooled, with May’s CPI at just 2.4%. This suggests public sentiment may be overreacting to tariff headlines.

A sustained rise in the price of crude oil, which jumped sharply after Israel attacked Iran, could hurt consumers and President Trump’s efforts to bring down energy costs.

The Israel-Iran war is now five days old, and the immediate impact is a crude oil price hike. From an average of $61-$62 per barrel from early April to early June 2025, West Texas Intermediate (WTI) crude quickly jumped to $68-$73 per barrel from June 13 onwards.

Oil prices are leaping, and stocks are weakening on worries that Israel’s attack on Iranian nuclear and military targets could escalate further and damage the flow of crude around the world, along with the global economy.

The Federal Reserve is widely expected to hold interest rates steady next week, with investors focused on new central bank projections that will show how much weight policymakers are putting on recent soft data and how much risk they attach to unresolved trade and budget issues and an intensifying conflict in the Middle East.