SF Fed President Mary Daly pointed to uncertainty in the Federal Reserve’s policy path caused by the Iran war and the resulting oil price shock. The market for the Fed’s Cut-Pause-Pause decision pattern by April 2026 is at 15% YES, with traders skeptical that rate decisions will follow this sequence.
Daly’s comments have traders reassessing the Fed’s course on the Fed rate decisions market. Geopolitical instability and economic disruptions from the conflict have pushed expectations for the Cut-Pause-Pause pattern lower. The market has 14 days until resolution, and traders are pricing in the likelihood that the Fed deviates from this path under pressure.
The oil shock, worsened by disruptions in the Strait of Hormuz, has also affected the WTI Crude Oil price market. The market lacks recent trades, but the probability of WTI prices reaching high levels in April has risen given ongoing tensions and potential supply constraints.
The core question for traders is whether the Fed will stick to its expected rate pattern or adjust for geopolitical and economic pressures. YES shares at 15¢ pay $1 if the Fed follows the predicted Cut-Pause-Pause sequence by April 30, a 6.67x return. That bet requires confidence that the Iran conflict and oil shock won’t force the Fed off course.
Watch for statements from Fed Chair Jerome Powell or other FOMC members on policy direction. New developments in the Iran conflict or any shift in the Fed’s stance could move these markets quickly.
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