Kevin Hassett ties Iran deal to bold new Fed rate-cut path

Every administration has its preferred economic forecast, and the ones that arrive with a release date attached deserve the most skepticism. Promises about commodity prices on cable television tend to age like fish, not wine.

That pattern has been on display since February, when U.S. and Israeli strikes on Iran triggered the largest oil supply disruption in history.

The Strait of Hormuz, which normally moves about one-fifth of the world's seaborne crude, has been effectively closed for nearly three months.

Gasoline hit $4.55 a gallon on the Friday (May 22) before Memorial Day, the most American drivers have paid heading into the holiday since 2022, according to AAA.

White House officials have responded with a consistent message, week after week, show after show. Energy Secretary Chris Wright said gas would fall in "weeks, not months."

Treasury Secretary Scott Bessent called for an international naval coalition to escort tankers. President Donald Trump promised gas would "drop like a rock" the moment a deal closed.

On Sunday Morning Futures, May 24, National Economic Council Director Kevin Hassett gave the Federal Reserve rate cut story its boldest dressing yet. He tied a coming Iran deal not just to plummeting fuel costs but to a clear runway for rate cuts under newly sworn-in Fed chair Kevin Warsh.

Photo by Bloomberg on Getty Images

The forecast Hassett keeps making

Energy prices "as soon as there's a deal" are expected to "plummet," Hassett told Fox News. "And when that happens, then there'll be a lot of room for the Fed to do the right thing and lower rates."

The "gusher" framing is not new. Idle reserves in Saudi Arabia and the United Arab Emirates would flood the market once the strait reopened, he argued.

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The administration has leaned on this forecast in part to keep the GOP affordability message as positive as possible heading into the November midterm elections, said TheStreet's Federal Reserve correspondent Mary Helen Gillespie, a veteran business and financial journalist.

There is a problem with the clean before-and-after story, though. Inflation was already running above the Fed's 2% target before the first strike, lifted by the lingering post-pandemic recovery, the energy shocks from the Ukraine war and Trump's tariff price pressures.

The deal Hassett pinned his forecast to is real but unfinished. Trump said Saturday, May 23, that an agreement had been "largely negotiated," subject to finalization between the United States, Iran, and various other countries, according to Al Jazeera.

Why the Fed is moving the opposite direction

The trouble with Hassett's framing is that the Fed isn't sitting on the sidelines waiting for cheaper oil. It's actively pushing in the other direction.

Annual Consumer Price Index (CPI) inflation hit 3.8% in April, the fastest pace since May 2023 and above the 3.7% economists expected, according to Fox Business.

Wholesale inflation rose 6.0% over the prior 12 months in the most recent Producer Price Index (PPI) report, the largest jump since December 2022, per the Bureau of Labor Statistics. Shelter costs climbed 3.3% over the year, up from 3% in March.

Some Fed officials, major Wall Street banks and other top Fed watchers expect the benchmark federal funds rate, which controls the cost of short-term borrowing, to hold steady for some time, Gillespie said.

Some market analysts go further, she noted, arguing that rising bond yields could force the central bank to hike by December or sooner.

"This is definitely not the scenario that Trump expected when he nominated Kevin Warsh to be the next Fed chair back in January," Gillespie said. "The president and Wall Street were expecting to see interest-rate cuts as soon as Warsh took over for Jay Powell. Those cuts are off the table at least in the short term, perhaps as late as mid-2027."

The 2032 problem hiding in plain sight

The most uncomfortable number for Hassett's pitch surfaced on CNN this weekend, in a report Gillespie flagged. For pump prices to drop below $3 a gallon, Brent crude has to fall below $70 a barrel, and the futures market does not anticipate that until 2032, according to CNN Business.

JPMorgan Chase (JPM) analysts expect Brent to average around $97 a barrel through the rest of 2026 even if the strait opens in early June, the same outlet reported.

What I ran the numbers on for this piece was the gap between Hassett's verbal forecast and the actual oil curve. Three lags sit between any deal announcement and cheap gas:

• Iranian production restarts take two to four weeks just to begin, with full output months out.
• Tanker transit through the strait could take up to three months to return to normal, according to Kpler senior oil analyst Victoria Grabenwöger.
• Refiners must work through fuller-than-normal inventories before lower wholesale prices reach pumps.
  
  Source: CNN Business

Translated to a kitchen-table number, the futures curve is telling households to budget for another six years of Memorial Day weekends with gas above $4 a gallon. That changes road-trip plans, grocery margins, and the math on every commute.

Iran has also said the strait will not return to its "pre-war status" under any agreement, according to NPR, citing the Tasnim news agency. Tehran wants sanctions relief, war reparations, and continued operational control of the waterway.

What this rate-cut bet means for your portfolio

If you're holding rate-sensitive equities, the Hassett story is the bullish case. Lower oil, lower inflation, faster cuts, higher multiples for growth names. Nvidia (NVDA), Microsoft (MSFT), and the rest of the megacap tech complex are priced for a Fed that's about to ease.

The base case looks different. One cut in September. Oil around $97. Gas above $4 into the fall. That's a portfolio environment that punishes long-duration tech and rewards energy, defense, and short-duration cash. Holding too much of one camp, in my view, is the bigger near-term risk than the headline outcome of the deal itself.

The Iran deal might land tomorrow. It might unwind by the weekend. Either way, the trade that's already priced in is the optimistic one. The risk sits on the disappointment side.

For now, the Hassett story has a familiar shape. A White House economist tells a network audience that relief is just around the corner, and the futures market shrugs. The honest read is to plan for the deal that gets stuck, not the one that gets announced.

That's a less satisfying script than the one Hassett pitched on May 24. It's also the one your portfolio is more likely to live in.

Related: Key Fed official shares strong rate cut warning

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This story was originally published May 29, 2026 at 8:33 AM.