Economists Warn Iran War Could Trigger US Recession with Odds Exceeding 50%

Key Points

• Goldman Sachs estimates inflation could rise to 3.1% by year-end due to higher energy costs
• PNC warns recession odds could exceed 50% if oil hits $150/barrel
• Wells Fargo says prolonged high oil prices could cancel out tax cut stimulus
• Consumer spending, which drives ~2/3 of US economy, is at risk from uncertainty

Full Details

The Iran war has significantly increased the risk that the U.S. economy could tumble into a recession within the next 12 months, according to economists and Wall Street analysts. Goldman Sachs analysts estimated that higher global energy prices would boost U.S. inflation by 0.2 percentage points to approximately 3.1% by year-end, putting a drag on consumer spending and economic growth. PNC Financial Services Group chief economist Gus Faucher told CBS News that if oil prices rise to $150 per barrel, the odds of a recession would exceed 50%. Wells Fargo chief economist Tom Porcelli warned that if oil prices remain elevated for several months, the economic headwind could cancel out the tax cuts and other stimulus that the Trump administration was counting on. Apollo Global Management chief economist Torsten Slok emphasized that the biggest risk is rising uncertainty dampening consumer spending, which accounts for roughly two-thirds of U.S. economic activity, while also weighing on financial markets.