Instead of a clearer path laid out ahead, Jerome Powell and his peers sat down to news of increased geopolitical conflict in the Middle East—potentially pushing up oil prices—as well as ongoing uncertainty over tariff agreements with key partners, and a downgrade of U.S. credit by Moody’s.

Of course, the elephant in the room will be President Donald Trump’s reaction if the FOMC once again refuses to heed his wishes in cutting the base rate.

The melting pot of issues leads most analysts to suspect the base rate will once again be held steady at 4.25 to 4.5%—a relatively tight stance according to dovish economists who argue the economy is coping relatively well according to data.

As David Doyle, head of economics at Macquarie Group, wrote in a note shared with Fortune this week, the Fed is walking a “tightrope.”

“The FOMC is likely to hold rates steady again this week,” Doyle continued. “The market reaction is likely to be driven by the communication and the potential guidance of further cuts. The dot plot may push out the suggested timing of rate cuts. We suspect this may tilt somewhat and suggest 25 bps [basis points] of cuts in 2025 and 75 bps in 2026 (from 50 bps in each year in March).”

Doyle added that Chair Powell “may describe recent inflation developments as encouraging, but also downplay their relevance given uncertainty ahead due to tariffs, fiscal policy, and the recent spike in the oil price due to geopolitical developments.”

The overall expectation from Wall Street is that there will be no change in the base rate, but here are some of the headline factors which may be influencing Chair Powell’s final decision to be announced later today.

Problem 1: Oil

Tensions in the Middle East are escalating by the day after Israel and Iran launched attacks on each other, with both sides targeting senior military officials.

Despite saying the U.S. wouldn’t wade into the conflict, President Trump posted on his social media site, Truth Social, yesterday that “we now have complete and total control of the skies over Iran,” and suggested Iran’s leader, Ayatollah Ali Khamenei, is an easy target despite being in hiding. Khamenei wouldn’t be “taken out … for now,” Trump added.

The escalating tensions in the Middle East pose a question over oil supply, with Iran threatening to close the Strait of Hormuz. The oil flow through the strait accounts for about 20% of global petroleum liquids consumption, writes the U.S. Energy Information Administration.

Vikas Dwivedi, global energy strategist at Macquarie, wrote in a note seen by Fortune: “We expect oil prices to remain volatile with an upward trend for the next few weeks as both Iran and Israel maintain their military intensity. Regardless of military or diplomatic progress, we expect Brent to rally towards the low $80 level before hitting a plateau as the perceived risk of actual oil supply disruption becomes largely discounted.

“From the low $80 plateau, the next price move will, in our view, be driven by what happens to Iranian oil export infrastructure. If it is damaged or destroyed, we believe oil will trend towards $100 due to the direct loss of Iranian exports and the risk premium associated with Iran’s response, including the blockage of the Strait of Hormuz.

“There will likely be selloffs on hopes for diplomatic solutions, profit-taking, and new shorts, but we expect those to be bought until the market ascertains the risk to oil supply.”

None of this makes Powell’s life any easier, as oil is a key factor determining the rate of inflation in the U.S.

Problem 2: Policy uncertainty

Policy out of the White House is also adding further uncertainty to the already blurry picture.

Trump’s “Big, Beautiful Bill” has raised eyebrows about the amount it could contribute to U.S. national debt, despite some deficits being offset by inflationary but moneymaking tariff policies.

The lack of action from the Oval Office isn’t impressing Moody’s, which downgraded U.S. debt a month ago to Aa1 from Aaa. That’s an issue for Powell, with the move pushing Treasury yields up, creating higher borrowing costs for the government that potentially have trickle-down inflationary impacts on consumers.

But as Deutsche Bank’s Jim Reid wrote in a note shared with Fortune this morning: “Ahead of the Fed’s decision, U.S. Treasuries rallied yesterday, on flight to quality, and as the weak data cemented the view that rate cuts were still likely in the months ahead.

“That meant yields fell across the curve, with the two-year yield (–1.5 bps) down to 3.95%, whilst the 10-year yield (–5.7 bps) fell to 4.39%. The outperformance of long-end bonds came after news that the Fed will be holding a meeting on June 25 to discuss changes to the supplementary leverage ratio, which may allow banks to hold more Treasuries.”

Another question is, of course, tariffs, with Powell already signaling he is waiting to see if businesses pass on increased costs to consumers.

Thierry Wizman, global FX and rates strategist at Macquarie, pointed out that level inflation data after the “Liberation Day” tariff announcements wasn’t a signal to bank on, writing the “low May CPI [consumer price index] print isn’t because tariffs don’t matter for measured inflation. Tariffs do matter, or will matter.

“Rather, inflation retreated because underlying notional demand has weakened … We still lean toward the view that Jay Powell will sound more ‘dovish’ next week than he did in May. We believe that were it not for the uncertainty caused by the tariffs, the combined information coming from the inflation and labor-market data would have compelled the Fed to have resumed cutting its policy rate by now.”

Problem 3: Trump

Powell also has to weather the storm that may come in the form of President Trump, who has made it clear that he wants the Fed to cut rates.

While Trump has stepped back from threats that made the market worry that the Fed’s independence might be under threat, he has made no secret of the fact he wants “too-late Powell” to cut the base rate.

Powell, on the other hand, has maintained that politics have absolutely no impact on the Fed’s decision-making.

Despite threats from Trump that he may threaten Powell over the lack of action, Richard Clarida, the former Federal Reserve vice chair from 2018 to 2022, said the White House will stop short of materially altering the central bank’s independence.

“We may be going to a world where the Fed loses some power in the regulatory sense,” Clarida told MarketWatch in an interview published yesterday. “But it looks like the Fed retains independence to raise or lower interest rates.”

On the chairman to follow Powell, Clarida added, Trump’s nomination will not be the only factor: “I think markets can have a say,” he explained, highlighting stocks and bonds would be in for a shaky ride if the candidate for Fed chairman wasn’t viewed as truly independent or committed to bringing inflation down.