Schwab Network Iran Conflict & Energy Volatility's Impact on FOMC, Bond Market
Apr 6, 2026
Collin Martin, Head of Fixed Income Research and Strategy at the Schwab Center for Financial Research, breaks down inflation, interest rates and bond-market reactions. He discusses how U.S.-Iran tensions and energy-driven price pressure shape the Fed’s outlook. He also covers ISM data, inflation expectations and how bond yields respond to the tug-of-war between inflation and growth.
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Services Inflation Rising While Employment Weakens
- Collin Martin says surveys show rising services inflation pressures with ISM prices paid jumping, driven by higher oil and gas costs.
- The ISM employment component fell sharply, creating a risk of higher inflation alongside weaker labor markets.
Watch Inflation Expectations Before Changing Policy
- Martin advises the Fed can sit on hold if the labor market remains stable while focusing on inflation expectations.
- He highlights monitoring PCE and inflation breakevens to judge whether inflation pressures become persistent.
Core PCE Still Above Target Pre‑Conflict
- Collin notes February's core PCE at 3.1% and consensus expects 3.0%, still well above the Fed's 2% target.
- He warns a pre-war upside surprise would signal worse inflation ahead even before energy effects from the Iran conflict.