Published May 9, 2026, 9:45 AM UTC. Confirmed by Bloomberg, Reuters, CNBC, BBC News, and The New York Times from independent sources.

TL;DR

  • Goldman Sachs this morning pushed its next two US Federal Reserve rate-cut forecasts back by one quarter each, to December 2026 and March 2027, citing inflation proving stickier than anticipated.
  • Iran war energy costs are a core driver of that inflation persistence. Brent crude remains above $100 and closed Friday at $101.29 after spiking nearly 3% on fresh US-Iran exchanges at the Strait of Hormuz.
  • US destroyers and Iranian forces traded fire at Hormuz on Thursday and Friday; Iran also fired missiles at the UAE. Trump insists the ceasefire is still intact.
  • A US peace proposal is under review in Tehran. Secretary of State Rubio expected a response by Friday; no announcement has come as of Saturday morning.
  • Strong April jobs data reduces near-term urgency for cuts further, reinforcing Goldman's view that the Fed will stay on hold until late year.

Goldman Sachs published an updated Federal Reserve outlook this morning, moving its forecast for the next two rate cuts back by one quarter each. The bank now sees the first cut landing in December 2026 and the second in March 2027. The primary driver cited: inflation is proving stickier than the bank had anticipated.

The Iran war is a significant part of that picture. Brent crude, the global oil benchmark, has risen from roughly $70 a barrel before the war started in late February to above $100 today. That means energy is adding a persistent upward push to headline inflation figures even as the broader economy holds up. Friday's April jobs report showed a second consecutive above-expectations payroll reading, which reduces the urgency for rate relief but also limits the Fed's room to cut even if it wanted to act sooner.

Morgan Stanley's chief economic strategist noted the jobs report "doesn't make cutting more likely," adding the Fed will remain focused on "containing upside inflation risks." Goldman Sachs Asset Management's Lindsay Rosner said the strong labor market means the Fed "will shift its focus to containing upside inflation risks."

For oil and rates traders, this is the core macro setup heading into the weekend: elevated energy costs are keeping monetary policy tighter for longer, while the resolution of the Iran conflict would simultaneously unlock the single biggest macro tailwind available to markets.

What Happened at Hormuz on Thursday and Friday

On Thursday, three US Navy destroyers -- including the USS Truxtun and USS Mason, per BBC reporting -- came under attack by Iranian missiles, drones, and small boats as they transited the Strait of Hormuz. US Central Command confirmed the warships were not hit and that all threats were eliminated.

On Friday, US forces struck two Iranian tankers -- M/T Sea Star III and M/T Sevda -- that attempted to violate the naval blockade. Iran separately fired ballistic missiles and drones at the United Arab Emirates, at least the second such attack on the UAE this week. Iran's UN ambassador accused the US of ceasefire violations; Iran's state media later said the situation was "back to normal."

Trump described the Iranian attacks as a "love tap" and insisted the ceasefire remained in effect. Iran is reportedly reviewing a formal US peace proposal, though no response had been announced as of Saturday morning.

Why Oil Markets Responded

The Strait of Hormuz (the narrow waterway connecting the Persian Gulf to the Gulf of Oman) carries roughly 20% of the world's oil and natural gas in normal times. It has been effectively closed since February 28. Any fresh military exchange raises the probability that the current ceasefire collapses and the closure deepens further.

Brent crude spiked from around $100 to nearly $103 on Thursday's news -- a move close to 3% -- before settling back to $101.29 at Friday's close. West Texas Intermediate (WTI), the US benchmark, settled at $95.42. For the week as a whole, oil actually fell more than 6%, reflecting genuine market hope that a formal peace deal might materialize and reopen the strait.

For broader context, this weekend also opened with a Russia-Ukraine 3-day Victory Day ceasefire -- a separate geopolitical development adding another layer of macro uncertainty for risk assets heading into Monday.

Implications for Traders

Rates and Fixed Income Traders

Goldman's timeline shift is the direct read-through. With cuts pushed to December and March, traders holding positions premised on mid-year easing will need to reassess. Rate-sensitive sectors -- real estate, utilities, and highly leveraged growth companies -- face an extended headwind. Treasury yields are likely to remain supported in the near term unless oil breaks materially lower.

Energy and Futures Traders

Brent above $100 is the floor as long as Hormuz stays closed. Any credible sign of a peace framework agreement would likely see a sharp drop toward $85 to $90. Conversely, a full ceasefire breakdown could push Brent toward $110 or higher. LNG prices face the same dynamics, with diverted tanker routes pushing up global shipping costs and tightening Asian supply.

Equity Traders

The S&P 500 and Nasdaq reached record highs in Friday's session on strong earnings and jobs data. But the macro drag is visible in pockets. IAG, owner of British Airways, said Friday its fuel costs would hit €9 billion this year -- €2 billion above last year -- and its shares fell more than 5%. Energy producers and defense contractors are on the other side. The ECB's Christine Lagarde added a European dimension, saying the bank is "torn between the risk of acting too early and too late" -- signaling that European rate policy also remains sensitive to Iran war energy costs.

Potential Positives vs Negatives from This Catalyst

Positives for markets:

  • Both sides appear to be avoiding formal escalation. Trump's "love tap" framing and Iran's "back to normal" state media signals suggest neither side wants to end the ceasefire.
  • A peace deal that reopens Hormuz would remove the largest single inflation driver in the current cycle, potentially moving the Fed cut timeline forward significantly.
  • Weekly oil losses of 6%+ show the market is already pricing in a meaningful probability of resolution -- a relief rally would be substantial if it materializes.
  • Strong labor market data means the economy can absorb elevated oil prices better than in past supply shocks.

Negatives for markets:

  • Both sides maintain blockades and each accuses the other of ceasefire violations. A misjudgment on either side could restart full hostilities.
  • Iran's ongoing missile strikes on the UAE suggest active military pressure continues despite the formal pause.
  • The Goldman rate-cut delay compounds the rates headwind for growth and real estate equities and signals inflation may be more persistent than markets had priced.
  • China's energy imports are declining as Hormuz stays closed, creating demand-side distortions in Asian markets that could weigh on commodity demand broadly if the closure extends further.

What Could Happen from Here (Next 24 to 72 Hours)

Base case -- ceasefire holds, talks continue: No formal response from Iran over the weekend. Oil trades in the $98 to $103 range. The Fed rate outlook remains unchanged. Equity markets open Monday near current levels pending new diplomatic signals. Confirmed by: no CENTCOM escalation, Rubio making constructive comments on talks. Invalidated by: formal Iranian rejection of peace framework, fresh military exchanges, CENTCOM resuming active strikes.

Upside case -- deal framework announced: Iran signals acceptance of a modified peace proposal. A phased Hormuz reopening is announced. Brent drops sharply toward $85 to $90. Risk assets rally broadly; the Fed's rate-cut timeline moves forward. Goldman's December forecast would likely come under immediate review. Airlines, consumer discretionary, and transportation lead the equity rally. Confirmed by: formal diplomatic announcement, oil moving sustainably below $95. Invalidated by: domestic Iranian political opposition blocking any deal.

Downside case -- ceasefire unravels: One or both sides formally ends the ceasefire. Iran tightens Hormuz restrictions. Brent breaks above $110. Equities sell off; energy, defense, and gold rally. Fed cuts get pushed further into 2027. Goldman and others revise inflation forecasts higher. Confirmed by: CENTCOM announcing resumed strikes, Brent sustained above $105. Invalidated by: diplomatic back-channels remaining active, oil retreating below $103.

What to Watch Next (24 Hours)

  • Iran's response to the US peace proposal: The single most important catalyst available this weekend. Any formal statement from Tehran moves oil and risk assets significantly.
  • CENTCOM statements: Further US military action at Hormuz would signal the ceasefire has effectively ended.
  • Sunday oil futures open: Asian market open Sunday evening gives the first price signal after any weekend diplomatic developments.
  • Fed speakers: Any scheduled remarks from Fed officials early next week will be read for whether Goldman's updated timeline reflects broader consensus.
  • Brent crude levels: Watch $103 as the near-term resistance that signals escalation pricing; $97 as initial support if talks progress.

Sources

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FAQ

Why did Goldman Sachs push back its Fed rate-cut forecasts?
Goldman cited inflation proving stickier than anticipated, driven in part by elevated energy costs linked to the Iran war and the effective closure of the Strait of Hormuz. With oil above $100 and the labor market still strong, there is limited near-term pressure on the Fed to cut.

How would an Iran peace deal change the Fed's timeline?
A credible Hormuz reopening would remove the single largest ongoing source of energy-driven inflation. Brent crude could retrace meaningfully toward $80 to $90, easing price pressure and potentially allowing the Fed to consider cuts earlier than Goldman's current December forecast.

Header image source: pexels by Mikhail Nilov. License: PEXELS.