Goldman Sachs Raises US Recession Probability to 30% as Iran War Boosts Oil Prices
Goldman Sachs analysts say the war-induced surge in oil costs has pushed inflation expectations toward 3% this year and raised recession odds to about 30%, with unemployment potentially climbing to 4.6% by year-end.
Key Points
- Goldman Sachs places recession probability at 30% over next 12 months
- Unemployment expected to rise to 4.6% by end of 2026 from 4.4%
- Inflation forecasts revised to ~3% from previous 2% expectations
- Oil price surge driving higher costs and reduced consumer purchasing power
Full Details
Wall Street analysts are cutting their forecasts for the US economy in 2026 as the impact of the Iran war begins to materialize, with Goldman Sachs Group Inc. now placing the risk of a downturn over the next 12 months at approximately 30%. The investment bank predicts the unemployment rate will climb to 4.6% by the end of 2026 from the current 4.4% level recorded in February. Several financial institutions have revised their inflation projections upward, now expecting rates closer to 3% rather than the 2% target that seemed achievable before the conflict erupted. The surge in oil prices driven by the Middle East conflict is eating into disposable incomes and putting downward pressure on hiring decisions across multiple sectors of the economy.
Why It Matters
The elevated recession risk combined with rising unemployment suggests the Federal Reserve faces a challenging policy dilemma, as fighting inflation while supporting growth becomes increasingly difficult amid external supply shocks.
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