Geopolitical uncertainty from the ongoing conflict with Iran has kept the Bank of Israel’s Monetary Committee on hold at its current 4 percent rate in recent meetings, with inflation near the 2 percent target midpoint yet exposed to upside risks from higher energy prices and supply constraints. Recent staff forecasts trimmed 2026 growth projections while maintaining expectations for modest easing to around 3.5–3.75 percent later in the year, leaving traders balanced between a July pause and a 25-basis-point cut on the July 6 decision date. Tight labor-market conditions and fiscal developments add further caution, though incoming inflation prints or de-escalation signals could quickly shift the narrow gap between the two leading outcomes.