Scott Bessent backs Kevin Warsh and bets on disinflation as Iran conflict cools

Treasury Secretary Scott Bessent is making two bets at once. He thinks the new Federal Reserve chair is the right person for the job, and he thinks inflation is heading lower. Both predictions, in his telling, are connected to the same thread: what happens after an energy shock fades.

Bessent publicly praised Fed Chair Kevin Warsh in June 2026, calling him an ‘incredible choice’ for the role and pointing to a professional relationship stretching back nearly two decades.

A new Fed chair, a familiar face

Warsh was confirmed by the Senate around May 13, 2026, stepping into the Fed chair role immediately after Jerome Powell’s term concluded. Bessent and Warsh have established a regular cadence of communication, including scheduled breakfast meetings designed to keep their policy perspectives aligned.

Warsh has a long history in Washington financial circles, having served on the Fed’s Board of Governors during the 2008 financial crisis. Bessent’s characterization of their 20-year connection suggests the two operate with a shared vocabulary on markets and monetary policy.

The Iran theory of disinflation

Bessent has consistently framed the recent inflation uptick not as a structural problem but as a supply shock driven by the Iran conflict, particularly its effect on energy prices. Back in April, Bessent stated directly that ‘the conflict will end, prices will come down, and then headline inflation will come down.’

On May 14, 2026, he went further, predicting ‘substantial disinflation’ after what he called one or two more elevated inflation readings.

Then on June 4, 2026, Bessent testified that the Iran conflict had been ‘halted.’ If the conflict has stopped, the energy supply shock should begin to unwind, and the disinflationary process he has been forecasting should start showing up in the data.

What this means for markets and rate policy

Bessent has been careful not to push explicitly for rate cuts. But by attributing current inflation to a temporary, now-resolving supply shock rather than entrenched demand-side pressure, he is essentially building the intellectual case for the Fed to ease policy once the data shifts.

For risk assets, including crypto, the implications of this scenario are meaningful. Lower inflation typically reduces the urgency for restrictive monetary policy, and the research context notes that decreased macroeconomic volatility and lower inflation levels may support risk assets overall.

The risk to Bessent’s thesis is that the Iran conflict’s resolution does not produce the energy price relief he expects, or that other inflation drivers, including tariffs and domestic demand, prove stickier than the supply-shock framework assumes. That is the scenario Bessent is betting against, and for now, he is making that bet loudly and in public.

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