The conflict in the Middle East has left the Federal Reserve braced for higher inflation, upending expectations about if officials will restart interest rate cuts.

A growing number of Federal Reserve officials worried the Iran war could further stoke inflation and wanted to make clear following their March meeting that the central bank may have to consider raising interest rates.

Federal Reserve members appeared split on whether a prolonged war in Iran could prompt more interest rate cuts than expected or a rate hike this year, according to minutes from the Federal Open Market Committee’s latest meeting released Wednesday,

Since the Iran war began on Feb. 28, borrowing costs have risen and markets have come under pressure, tightening conditions without any policy move from the Fed.

The minutes released on Wednesday outline the discussion behind closed doors at last month's meeting of the Federal Open Market Committee.

Federal Reserve officials expected that higher oil prices resulting from the Iran war would increase inflation in the near term and delay price inflation falling back toward their 2% goal, according to minutes from the central bank’s March policy meeting released Wednesday.

The market's expectations for a rate cut in 2026 doubled after the US and Iran agreed to a two week ceasefire deal.

The Federal Reserve released the minutes from its March FOMC meeting on Wednesday, signaling that energy price stocks from the Iran war will delay chances of officials lowering inflation closer to their 2% target.