Stagflation is an economic condition characterized by simultaneous slow economic growth or recession, high unemployment, and high inflation. It is particularly difficult to address because tools for fighting inflation (raising interest rates) worsen unemployment, while tools for fighting recession (lowering rates, stimulus) worsen inflation. The term became prominent during the 1970s oil crisis. The Federal Reserve faces a stagflation dilemma during the 2026 Iran war as oil prices push inflation higher while job losses signal recession risk.