Investors believe the Fed will raise borrowing costs as it works to tame inflation, which has risen a full percentage point since the Iran war started.

The Fed's September rate decision hinges on August CPI and PPI data due September 10-11, with inflation still well above the 2% target.

Traders fully price in a Fed rate hike by October 2026 after August PPI data shows 5.4% annual inflation, well above the central bank's 2%