Financial markets swung sharply as the Iran war, higher energy costs and uncertainty over US policy revived concerns about inflation. The developments matter because persistent price pressures could limit the Federal Reserve’s scope to cut interest rates, complicating President Trump’s efforts to deliver lower borrowing costs and support economic growth.

The Federal Reserve kept interest rates unchanged while assessing the inflationary effects of the conflict and other pressures, including tariffs. Rising oil prices have raised the risk of higher fuel and transport costs feeding into the wider economy, while investors have reassessed expectations for future rate cuts and moved between shares, bonds and energy assets.