New Delhi, March 4 -- The war in Iran is complicating an already difficult inflation picture for the Federal Reserve, and potentially pushing rate cuts further into the future.

Oil prices have surged more than 15% since U.S. and Israeli strikes killed Iran's Supreme Leader Ali Khamenei on Saturday, and gas prices in the U.S. have increased alongside them.

Iran has effectively closed the Strait of Hormuz, which handles 20% of global oil flows, and bond markets look like they're pricing in inflation. The 10-year Treasury yield topped 4.06% Tuesday as the Dow fell about 1,200 points before recovering some of its losses.

Rate markets are factoring in fewer cuts this year. The Fed was likely going to hold rates steady in March, but investor...