More than six months after it began, the conflict centered on Iran remains unresolved, and its effects on global energy markets are a big part of why the Federal Reserve raised interest rates this week.
The conflict started on February 28, 2026, and has drawn in the United States, Israel and several Gulf states on one side, with Iran and allied groups across the region on the other. In recent days, activity has centered on the Strait of Hormuz and surrounding waters, a narrow passage through which a large share of the world's seaborne oil trade normally flows. U.S. Central Command said this week that its forces destroyed two small Iranian boats after they attempted to take control of an American unmanned surface vessel, and that an American drone had fired on boats off Iran's Hormozgan coast in an incident earlier in the week. Iranian media described a separate strike as hitting fishing boats.
The disruption has kept oil prices elevated for weeks, a major factor behind the inflation that pushed the Fed to raise rates. In the United States, the House of Representatives voted for a third time this week on a measure aimed at ending American involvement in the conflict, underscoring continuing debate in Washington over how the country should be involved. Around the world, protests over the conflict and its effect on fuel prices have continued in multiple countries since the war began.
Diplomacy has continued alongside the fighting. China's foreign minister, Wang Yi, met his Iranian counterpart in Beijing this week and reaffirmed support for a political settlement, while also urging that regional tensions not spread further into Yemen and calling for the earliest possible reopening of the Strait of Hormuz to shipping. Officials in Qatar have separately warned of the economic strain the prolonged crisis is placing on the wider Gulf region.
Markets and diplomats alike are watching for any sign of a ceasefire or de-escalation, since the fate of Hormuz shipping remains one of the biggest swing factors for global oil prices and, by extension, inflation.
Why does this conflict affect prices in the United States?
The Strait of Hormuz is a key route for global oil shipments, and disruptions there have pushed oil prices higher worldwide, feeding into the inflation that led the Fed to raise interest rates.
Is there a ceasefire in place?
No broad ceasefire is currently in effect, though diplomatic efforts, including recent talks involving China and Iran, are continuing.