The Fed could struggle if U.S. enters stagflation due to Iran war: Ed Yardeni

• The Iran war raises the possibility of stagflation, characterized by rising inflation and slowing growth, similar to the 1970s 'lost decade' for stock markets.
• Central banks, particularly the Federal Reserve, face a dilemma between combating inflation and supporting economic growth in a stagflationary environment.
• Despite geopolitical uncertainties and rising commodity prices, some industry analysts are still increasing earnings expectations for 2026 and 2027.
• Yardeni has raised his recession odds to 35% but maintains a base case that the current economic challenges will pass, akin to the 2020 recovery.

Ed Yardeni warns that a prolonged Iran war could lead to stagflation, reminiscent of the 1970s, posing a significant policy bind for central banks, especially the Federal Reserve due to its dual mandate. While some analysts remain optimistic, Yardeni has increased his recession odds, though it's not his base case, highlighting the uncertainty and potential for a challenging economic environment.