Strait of Hormuz Reopens and Oil Prices Drop, Impacting Federal Reserve Outlook Maritime Activity Reports, Inc. April 17, 2026 © Adobe Stock/Grispb Reopened Middle East shipping and plummeting oil prices on Friday boosted bets the Federal Reserve may begin cutting interest rates as soon as December, but its policymakers still face a tangled outlook ahead of their April 28-29 meeting. Iran's announced reopening of the Strait of Hormuz pushed oil below $90 a barrel for the first time in more than five weeks, but U.S. central bank officials will now need to assess how much damage the seven-week conflict has done to underlying price trends, whether hostilities are over for good, and whether they are now confident inflation will fall to their 2% target. Following a ceasefire announcement between Israel and Lebanon, Iran said on Friday it would reopen the strait, which handles about a fifth of the world's oil supply, to shipping for the duration of a current ceasefire with the U.S. Global oil prices that had been stuck around $95 a barrel plunged below $89, and traders in contracts tied to Fed interest rates changed their view from the central bank remaining sidelined until well into 2027 to a resumption of rate cuts by late this year. In a recent interview with Reuters, San Francisco Fed President Mary Daly noted how the evolution of the conflict, and the possible response of oil prices if hostilities were to ease, could influence the Fed's confidence that inflation will decline from current levels about a percentage point above the central bank's target. "As long as we have the conflict resolved soon, you would find us in a place where it just takes longer, but it doesn't stall the progress" on inflation, Daly said in the interview. "It just takes longer for all that to work itself through." The Fed is still likely to leave its benchmark overnight interest rate in the 3.50%-3.75% range at its meeting later this month, with inflation still showing lit