Hot inflation, Iran war and Fed uncertainty rattle markets

Producer-price inflation has come in hotter than expected while consumer inflation is steady but no longer clearly cooling, just as oil and fuel prices spike on war with Iran and disruptions near the Strait of Hormuz. The Federal Reserve is widely expected to hold rates steady, but markets are rapidly pricing out near-term cuts and even debating whether renewed hikes could return, amid political pressure from Trump and fears of policy missteps. Stocks and Treasury yields are swinging as investors reassess safe havens and growth prospects, with GDP revised down, manufacturing weakening, and consumers squeezed by groceries, debt, and higher energy costs. Together, these developments raise the risk of a stagflation-like mix of slower growth and stubborn inflation, leaving the outlook for 2026 unusually fragile and uncertain.