Iran war: Soaring oil price will be a key driver of Fed policy; opportunities, risks for investors

[SINGAPORE] When Jerome Powell was asked after the last Federal Open Market Committee meeting in January how rising geopolitical risks were shaping his thinking about the US economy, he offered a pretty simple and straightforward answer.

“A lot of it is around energy – oil,” the Federal Reserve chair said.

While geopolitical events can have profound implications for the global order and every country’s place in it, what usually matters to the Fed in these instances is the extent to which any change in the price of oil affects US inflation and economic activity.