Hiring slowed markedly in June, falling short of economists’ expectations and displaying a wobbly labor market amid elevated inflation set off by the Iran War.

The U.S. added 57,000 jobs in June, according to the report, which marked a decline from from 172,000 jobs added in May.

The sluggish pace recorded in June departs from strong performance for the labor market so far in 2026. Employers added a robust average of about 114,000 jobs each month from January to May, Bureau of Labor Statistics data showed.

Hiring had proven unexpectedly resilient, despite a rise in costs borne by businesses and shoppers.

The Middle East conflict, which began on Feb. 28, prompted the Iranian closure of the Strait of Hormuz, a maritime trading route that facilitates the transport of about one-fifth of the global oil supply. The standoff triggered one of the largest oil shocks ever recorded.

The pace of annual inflation stands at 4.2%, clocking in at more than twice the Federal Reserve’s target rate of 2%.

The combination of elevated inflation and a resilient labor market has raised the chances of an interest rate hike, futures markets show, posing a risk for corporations eager to keep borrowing costs relatively low.

Federal Reserve Chair Kevin Warsh briefly sent stocks tumbling this month during his first press conference atop the central bank. Warsh voiced a commitment to bringing inflation down to the Fed’s desired level.

“Persistently high prices are a burden for the American people,” Warsh told reporters in Washington, D.C. “This committee will deliver price stability.”

Futures markets peg the odds of an interest rate hike in September at about 64%, according to the CME Group’s FedWatch Tool, a measure of investor sentiment.

To be sure, the path forward for interest rates remains highly uncertain. Oil and gasoline prices have eased in recent weeks in response to negotiations between the U.S. and Iran, offering hope of a cooldown of inflation in the absence of rate increases.

On Wednesday, Warsh weighed in on the bullish side of an ongoing debate among policymakers, investors and the general public about the potential impact of AI on the labor market and wider economy.

The technology could create jobs and boost productivity, strengthening the economy of the U.S. and other nations, according to Warsh.

“This is a big paradigm shift both for the conduct of our policy and for our economies,” Warsh said. “I think the jobs will be greater. Prosperity will be stronger.”