Market strategist Ed Yardeni has indicated that a breakdown in the ceasefire between the United States and Iran could trigger a fresh acceleration of inflation, potentially compelling the Federal Reserve to raise interest rates.

The resurgence of market anxieties regarding inflation has brought the Federal Reserve back into the spotlight, Yardeni remarked in an interview on Wednesday. He noted that the Fed has not only pivoted towards a tightening stance but may, in reality, be compelled to implement further tightening measures.

Yardeni, who is the president and founder of Yardeni Research, made these comments following warnings from former U.S. President Donald Trump that the provisional U.S.-Iran ceasefire agreement may have already collapsed. Trump's statements heightened the risk of peace talks concluding and conflict escalating once more. This development came after the U.S. launched new strikes against Iran and revoked exemptions that had permitted Iranian oil sales. Consequently, crude oil prices surged, global stock markets declined, and U.S. Treasury yields hit intraday lows.

Yardeni described the situation as a persistent geopolitical crisis that appears intractable. In a sense, he suggested, the situation has reverted to the starting point, echoing the circumstances of March.

Yardeni further stated that even though the U.S. labor market appears robust, developments in the Middle East have the potential to alter the entire landscape. While consumer behavior has been strong, he cautioned that risks persist, particularly if gasoline prices were to surge again.