Renewed hostilities in the Gulf in recent weeks have reignited concerns over stagflation, undermining hopes that the temporary U.S.-Iran truce would ease inflation and support global growth.
Oil, Gas and Inflation Pressures Rise
Brent crude climbed back above $100 a barrel last week for the first time since May, while European natural gas prices are headed for their biggest monthly gain since March, per Reuters, as quoted on Yahoo Finance.
On July 24, 2026, the United States imposed new tariffs of 10% and 12.5% on goods from 60 trading partners, including the European Union and China, likely raising prices further. Fresh U.S. tariffs on imports from those trading partners have added to inflation concerns and pushed bond yields higher.
Central Banks Face a Tough Trade-Off
Persistently high energy costs and trade tensions may force central banks to keep interest rates elevated even as economic growth weakens. Europe and Asia remain the most vulnerable due to their reliance on imported energy, while the United States is also feeling the impact through higher fuel prices and borrowing costs.
Fed May Stay Put in July but Turn Hawkish Later?
The Fed may keep rates unchanged in the July 28-29 meeting. Rates are widely expected to stay unchanged at the 3.50% to 3.75% range, though a small minority (around 30%, up from 12.8% one week ago) prices in a quarter-point hike, as of July 24, 2026.
Fed funds futures are pricing in a roughly 80% likelihood that the central bank lifts borrowing costs at its September policy meeting, according to CME’s FedWatch tool (at the time of writing). A week ago, those odds were hovering around 57%.
Why the Fed Can Hike Rates in September?
Latest labor data reinforced expectations that the Fed can stay focused on inflation, especially as rising energy prices threaten to fuel price pressures. Initial jobless claims dropped to 187,000 for the week ended July 18 — the lowest level since 1969 — underscoring continued strength in the U.S. labor market.
Inside U.S. GDP Growth Momentum
The U.S. economy grew at an annualized rate of 2.1% in the first quarter of 2026, up from 0.5% in the fourth quarter of 2025. On a year-over-year basis, the GDP increased by 2.70%.
Now, S&P Global Ratings projects baseline real GDP growth of 2.2% for the full year 2026. J.P. Morgan expects U.S. GDP growth of 1.5-2.0% for 2026, based on resilient consumer spending, solid AI capex and contained Middle East tensions.
Now, with Middle East tensions showing no signs of slowing, U.S. GDP growth may be downgraded. J.P. Morgan expects core PCE inflation of 3.4% at the year-end, up from 2.9%, due to a supply shock in oil and gas, fertilizer and helium tied to the Strait of Hormuz.
Inside Global Growth Momentum
The World Bank warned that the worst-case scenarios could slash 2026 global growth down to 1.3%, with baseline projections lowering growth to around 2.5% as trade momentum drops sharply from 4.7% to roughly 1.5-2.5%, according to UN Trade & Development.
How to Play Stagflation Risks with ETFs?
Against this backdrop, we suggest a few ETFs that can be worth investing in at the time of higher inflation.
AXS Astoria Inflation Sensitive ETF PPI
AXS Astoria Inflation Sensitive ETF is an actively managed, broadly diversified ETF that seeks long-term capital appreciation in inflation-adjusted returns. Renowned ETF experts at Astoria Portfolio Advisors manage PPI by investing where the opportunities are: cyclical stocks (such as natural resources, energy, industrials and materials), commodities and TIPS.The fund charges 58 bps in fees and yields 1.30% annually.
Fidelity Stocks for Inflation ETF FCPI
The underlying Fidelity Stocks for Inflation Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies with attractive valuations, high quality profiles and positive momentum signals, emphasizing industries that tend to outperform in inflationary environments. The fund charges 15 bps in fees and yields 1.61% annually.
Quadratic Interest Rate Volatility And Inflation Hedge ETF IVOL
The Quadratic Interest Rate Volatility and Inflation Hedge ETF is actively managed and seeks to achieve its investment objective primarily by investing, directly or indirectly, in a mix of U.S. Treasury Inflation-Protected Securities and long options tied to the shape of the U.S. interest rate curve. The expense ratio of the fund is 1.02%. It yields 3.96% annually.
Horizon Kinetics Inflation Beneficiaries ETF INFL
The fund gives exposure to domestic and foreign equity securities of companies that are expected to benefit, either directly or indirectly, from rising prices of real assets (i.e., assets whose value is mainly derived from physical properties such as commodities) such as those whose revenues are expected to increase with inflation without corresponding increases in expenses. It charges 85 bps in fees.
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Fidelity Stocks for Inflation ETF (FCPI): ETF Research Reports
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This article originally published on Zacks Investment Research (zacks.com).