Americans weary of high prices have recently been able to count on cheap gasoline as a welcome offset for sticker shock at the grocery store and beyond, but the Iran conflict threatens to throw that off course. A rule of thumb among economists is that a 5% increase in oil prices raises year-over-year measures of inflation by about 0.1 percentage points. That might not sound like much, but over time, increases of that level have a noticeable impact on prices. Elsewhere, Austria’s central bank governor said the European Central Bank should be prepared to quickly move its key interest rate in either direction if some of the potential threats to the eurozone economy arising from a fresh increase in uncertainty come to pass.

Oil prices surged after the U.S. and Israel launched attacks against Iran, along with diesel and gasoline futures. The conflict, depending on how it progresses, could lead to higher prices at the gas pump and higher overall inflation.

It is too soon to know with any clarity how the conflict could affect overall U.S. prices. But here is how gasoline and inflation fit together, and some possible scenarios.

There are countless ways the U.S. and Israeli attack on Iran could go wrong. Indeed, commentators seem to have dwelt on little else. Instead, let’s game out everything going right, if only because that would be a game changer for world energy security and geopolitics. If Iran, along with Venezuela, is soon ruled by a regime friendly or at least not hostile toward the U.S., that would neutralize two oil exporters who have regularly been the cause of supply disruptions in recent generations, writes The Wall Street Journal's Greg Ip.

• European Gas Prices Soar After Qatar LNG Halt Jolts Market

Attacks by the U.S. and Israel on Iran, and that country’s response, make the outlook for the global economy more uncertain, but it is too early to judge the impact, the International Monetary Fund said Tuesday. In a statement, the Fund said it is closely monitoring developments in the Middle East, where the situation is “highly fluid.”

• Why Oil Markets Can’t Shrug Off This Conflict

Before U.S. and Israeli missiles struck Tehran, users of Kalshi and Polymarket placed short-term wagers that Iran’s Supreme Leader, the Ayatollah Ali Khamenei, would be out of power.

Now, those bets are under scrutiny after the killing of Khamenei. Some U.S. lawmakers have raised questions about whether the markets should be allowed, and if some anonymous traders had inside information ahead of the strikes. Meanwhile, some users complained about how their bets were resolved.

9 a.m.: Johnson Redbook Retail Sales Index
10 a.m.: RCM/TIPP Economic Optimism Index
4 p.m.: Domestic Auto Industry Sales

8:15 a.m.: ADP National Employment Report
9:45 a.m.: US Services PMI
10 a.m.: ISM Report On Business Services PMI
11 a.m.: Global Manufacturing PMI
2 p.m.: U.S. Federal Reserve Beige Book

Investors trimmed bets on interest-rate cuts by the Fed this year as the conflict in the Middle East stokes inflation fears because of rising crude prices. Since it is a problem with energy supply rather than demand, the Fed might look through it, but Harbor Capital's Jake Schurmeier says if the war keeps inflation above 2% for too long, rate cuts could become harder to justify. "We're going to be going on five straight years of being well above the Fed's target," he says. "You're kind of running out of excuses." He sees increasing likelihood of markets pricing one or no cuts this year if inflation remains too hot. — Paulo Trevisani

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by markets reporter Vicky Ge Huang in New York. Send your tips, suggestions and feedback to vicky.huang@wsj.com.