US-Iran Conflict May Force CBN to Rethink Rate-Cut

A senior market analyst at FXTM, Matthew Anthony, warned Tuesday that deepening geopolitical instability is already triggering volatility across financial markets and could complicate monetary policy decisions in 2026.

“Tensions in the Middle East are sending shockwaves through global markets and stoking fresh inflation concerns as oil prices climb,” Anthony said.

“If these pressures persist, central banks—including Nigeria’s—may be forced to reassess their policy direction.”

Nigeria’s inflation rate had shown signs of easing, falling to 15.06 per cent in February, just before the latest flare-up involving Iran.

However, the recent surge in global oil prices is beginning to filter into the domestic economy.

Gasoline prices in Africa’s largest crude producer have risen by more than 30 per cent in recent weeks, driving up transportation costs and increasing pressure on household budgets.

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Brent crude rose above $103 per barrel on Tuesday, as concerns about the potential of supply disruptions stemming from attacks on energy infrastructure in the Middle East.

“All eyes are on the Strait of Hormuz and broader regional stability,” Anthony noted. “Any prolonged disruption could sustain oil at elevated levels, feeding into inflation globally.”

Despite Nigeria’s status as an oil exporter, which has provided some insulation from external shocks, early warning signs are emerging.

The naira has weakened slightly, slipping about 0.3 per cent against the dollar over the past two weeks, while trading around NGN1,385 compared to NGN1,360 before tensions escalated.

Analysts say such pressures could complicate the CBN’s easing cycle.

“These shifts may challenge the CBN’s plans to keep lowering interest rates,” Anthony said. “Rising fuel costs and imported inflation could force a more cautious stance.”

Globally, investor sentiment has also deteriorated. Risk aversion returned to markets on Tuesday, reversing a brief rally in technology stocks, as geopolitical uncertainty dampened appetite for risk assets.

Meanwhile, expectations for monetary easing among major central banks have shifted sharply.

He noted that traders are now pricing in just one rate cut from the US Federal Reserve in 2026, amid concerns that conflict-driven inflation could persist.

“Market expectations have rapidly changed,” Anthony said. “We’re seeing fewer bets on rate cuts and even the possibility of hikes from some central banks if inflation remains elevated.”

According to the analyst, central banks, including the Federal Reserve, European Central Bank, and Bank of England, are expected to remain under scrutiny this week as policymakers weigh the inflationary impact of the conflict.

For Nigeria, analysts say the combination of rising fuel prices, currency pressures, and global uncertainty may ultimately force policymakers to pause, or even reverse, their planned rate cuts.

“Ultimately, the outlook for monetary policy in Nigeria will depend on how persistent these external shocks prove to be,” Anthony added. “But the risks are clearly tilted toward caution.”