Warren Presses Fed to Update Big Bank Stress Tests to Reflect Oil Price Shocks From Trump’s War with Iran

Warren Presses Fed to Update Big Bank Stress Tests to Reflect Oil Price Shocks From Trump's War with Iran

"As the President's illegal war has thrown into stark relief, the Fed appears to have inadvertently dialed down an historic source of systemic stress in its 2026 economic scenarios right before it unfolded."

"At the very least, the Fed should immediately adjust this component of the 2026 scenarios to test for a 140 percent increase in oil prices."

Text of Letter (PDF)

Washington, D.C. - U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, sent a letter to Michelle Bowman, Vice Chair for Supervision of the Federal Reserve (Fed), requesting that the Fed immediately update its 2026 stress testing scenarios ahead of the June stress tests, in light of the historic oil shock triggered by President Trump's illegal war in Iran.

"(S)tress tests must be forward-looking evaluations of how big banks would perform in a hypothetical severely adverse economic scenario to ensure they are resilient and can continue to serve households and businesses even in a severe recession," wrote the Senator. "If stress tests do not force banks to prepare to respond to worst case scenarios, they leave the banking system -and the public-unprepared in the face of economic crises."

"As the President's illegal war has thrown into stark relief, the Fed appears to have inadvertently dialed down an historic source of systemic stress in its 2026 economic scenarios right before it unfolded. At the very least, the Fed should immediately adjust this component of the 2026 scenarios to test for a 140 percent increase in oil prices," wrote the Senator. "It is not too late to do so as the Fed has only begun to calculate the results, which will not be published until the end of June. It is also essential for the Fed to explain why it severely weakened the oil price shock and other aspects of the stress testing scenarios in light of pressure from the banking industry."

"I ask the Fed to reverse course on its broader changes to the stress testing framework, starting by notifying the public that it has adjusted the shock to oil prices to at least 140 percent by June 2, 2026," the Senator concluded.

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