Political turmoil and flat inflation rippled through global financial markets this week, illustrating again how the behaviors of policymakers influence the international economy.

In the U.S., two key measures of inflation came in lower than analysts hoped, raising questions about the wisdom of an expected Federal Reserve rate hike later this year. Globally, markets roiled as tensions between the U.S. and North Korea exacerbated and the crisis in Venezuela reached a fever pitch.

We have a lot of major developments to cover this week so let's dig right in.

What inflation?

Analysts reeled Thursday when the Labor Department reported that U.S. producer prices fell in July, dragged down by the falling costs for services and energy products. The producer price index, which details the average change in selling prices from the perspective of domestic producers, fell 0.1 percent last month after going up 0.1 percent in June.

July's decline was the biggest drop in producer prices in nearly a year. Economists had forecast that the PPI would actually go up 0.1 percent.

Inflation came in relatively benign on Friday when the Labor Department reported that the Consumer Price Index increased 0.1 percent in July. That means the cost Americans pay for goods and services has ticked up slightly, although economists predicted the CPI would go up at least 0.2 percent.

This casts doubt on the Federal Reserve's claims that soft inflation this year is a temporary anomaly — sentiment reiterated by Fed Chair Janet Yellen last month when she testified on Capitol Hill.

Pundits believe the Federal Reserve will announce at its September meeting plans to unwind its $4.5 trillion balance sheet and a discussion on raising rates won't happen. It's possible the Fed will delay the rate hike to December to see whether inflation will stabilize.

The Fed is close to achieving its goal of full employment as unemployment continues to decline to decade lows. Plus, job gains have been strong the past two months. But wage growth remains stagnant, barely budging even as more and more jobs are added to the economy.

We have less than a month until the Fed's September meeting, where we should get an idea of how the bank presidents feel about the prospect of another rate hike given recent economic data. At least one dovish Fed official said this week inflation would have to accelerate for him to support a rate hike at the end of the year.

Venezuela in turmoil

Conflict is brewing in Venezuela after authorities say a group of civilians and soldiers launched an attack on a military base last weekend, killing two people in the latest salvo of an uprising that points to possible civil war.

The South American nation has been in the throes of upheaval since the election of President Nicolas Maduro, whose popularity has waned over the last four years because of the country's crippling recession, inflation and food and medicine shortages. Disapproval of the government mushroomed with the dissolution of the country's parliament and the creation of a political power members of the Opposition party feel is intended to keep the president in office. That new political party fired the country's chief prosecutor, an opponent of Maduro's who openly accused him of human rights abuses and committing election fraud to create a new assembly.

Opposition forces have mounted protests as Maduro has attempted to silence critics by jailing them. Those demonstrations have turned violent, leaving more than 120 people dead and hundreds more injured or imprisoned. Opposition leaders have urged the military to abandon their allegiance to Maduro for fear that he's leading the country into a dictatorship.

"Maintaining the support of the military is a key factor in Maduro's survival, and many in the military have a vested interest in ensuring (his) survival," Stuart Culverhouse, the global head of macro and fixed income research at Exotix Capital, told CNBC in an email.

The country's economic condition continues to deteriorate. Falling oil prices, which have created problems in the U.S., have devastated Venezuela, which depends almost entirely on oil exports. It owes more than $250 million to bondholders, and is already contending with sanctions from the U.S.  President Donald Trump has threatened harsher sanctions — mainly, a ban on Venezuelan oil — if the situation continues to tailspin. If Venezuela is unable to sell oil to the U.S., one of its top customers, it could throw the country into chaos.

North Korea threatens nuclear war. Again.

Hostilities between the U.S. and North Korea intensified this week when President Donald Trump declared that the Communist country would face "fire and fury like the world has never seen" if it continues to threaten America.

That set off a series of threats and demonstrations of force between the two countries, shaking global financial markets and depressing major stock indexes in Europe and Asia.

The backlash following Trump's comments was swift as North Korea warned it plans to initiate a preemptive military strike against the U.S. and the Pacific territory of Guam. Earlier this week, Secretary of State Rex Tillerson scurried to calm worries and assure the American people that war wasn't on the horizon and dialogue with North Korea regarding disarmament is still possible.

Military solutions are now fully in place,locked and loaded, should North Korea act unwisely. Hopefully Kim Jong Un will find another path!

— Donald J. Trump (@realDonaldTrump) August 11, 2017

North Korea was not placated. Instead, the country released a report calling Trump's comments a "load of nonsense" and suggesting that dialogue is impossible "with such a guy bereft of reason." North Korea's military has issued additional threats that it would turn the U.S. mainland into "the theater of a nuclear war."

The prospects are frightening. Trump made his comments after intelligence sources revealed they believe North Korea had developed the ability to miniaturize a nuclear warhead to fit atop a missile. If the country does make any moves against Guam, the U.S. has said it is prepared to use force to stop any ballistic missile or nuclear programs.

The tension has rattled global markets, depressing Germany's DAX and France's CAC 40 by 0.7 percent in early trading Wednesday, according to CNN Money. The Stoxx Europe 600 Index dropped 1 percent while London's FTSE 100 tumbled by 0.5 percent. Shares in Seoul, South Korea slumped to a seven-week low. Futures on the S&P 500 dwindled 1.1 percent; the Nasdaq composite fell 1.7 percent; and the Dow Jones lost 139 points Thursday.

Investors frantically moved assets into safe havens, ratcheting up the price of gold and the Swiss franc and US treasury's. The 10 year Treasury note is currently yielding 2.19 percent, hovering at a 1 month low and only a few basis points from the low on the year. The U.S. dollar strengthened against the euro, as did the Japanese yen and British pound.

And while foreign leaders and congressional leaders chastised Trump for his incendiary remarks, the president seemed interested in a show of muscle. He tweeted that the U.S. nuclear arsenal is "far stronger and more powerful than ever before." He added that "there will never be a time that we are not the most powerful nation in the world!"

All we can do is hope that cooler heads prevail in Venezuela, the U.S. and North Korea so raucous market activity subsides.