Entering the meeting, markets are pricing two interest rate cuts from the Fed in 2025, in line with the central bank's median dot plot projection from March. But since then, there have been significant changes to tariff policy, which will put any updates to the Fed's outlook in particular focus.

Oil prices rallied over 7% today after Israeli airstrikes on Iran. This elevated geopolitical uncertainty and requires the oil market to price in a larger risk premium for supply disruption.

If prices go up, Fed officials may be inclined to raise its benchmark rate, raising borrowing costs for businesses and consumers. That could lead to businesses to cut jobs, particularly in the high-growth tech sector, and force Americans to pull back on spending, which drives more than 70% of economic activity in the U.S.

U.S. investors on Friday sought refuge in safe-haven assets like the dollar and gold, as oil prices surged after Iran retaliated against Israel's biggest-ever military strike against the major crude producer.

The Israeli military warns Iranians to evacuate arms factories, signaling what could be a further widening of the campaign.

The country’s exports mostly come from Kharg Island in the Persian Gulf. But Israel’s energy facilities are also at risk.

The Indian rupee is expected to slip past 86 to the U.S. dollar at the open on Friday, hit by surging oil prices and sliding risk assets after Israel attacked targets in Iran.

Although the U.S. is a net oil exporter, higher oil prices could increase inflation and lower economic growth.

President Donald Trump has repeatedly demanded the Federal Reserve slash interest rates. But Fed officials have stood pat, waiting to see how his administration’s sweeping policy changes affect the economy first.

U.S. ultra-low sulfur diesel futures hit the highest level since February, outpacing gains in oil and gasoline as analysts warned that diesel supply is the most exposed to the conflict in the Middle East.

Sir Keir Starmer has warned that this week’s explosive developments in the Middle East will deal a blow to the cost of living for ordinary Britons. Speaking ahead of his arrival in Canada for the G7, the Prime Minister voters will be seeing “the impact already on the economy and on oil prices.”