Economists Warn of Looming Recession Amid US-Iran Conflict

Experts say the risk of a recession in the next 12 months has risen significantly due to the global oil shock triggered by the recent US-Israeli attacks on Iran.

Apr. 1, 2026 at 2:41am

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Economists are increasingly warning that the United States is heading towards a recession, with some forecasting a high likelihood of one occurring within the next year. The primary driver appears to be the global oil price shock stemming from the recent US-Israeli military actions against Iran, which have disrupted global energy supplies. While there is disagreement on the exact timing, many analysts believe a recession is now more probable than not, especially if the conflict in the Middle East continues to escalate.

Why it matters

A recession would have significant economic and social impacts, potentially leading to job losses, reduced consumer spending, and other hardships for many Americans. The prospect of a downturn also raises concerns about the stability of financial markets and the broader economy. Understanding the factors contributing to this heightened recession risk is crucial for policymakers, businesses, and individuals to prepare and mitigate the potential fallout.

The details

Economists point to several key factors that are increasing the likelihood of a recession. The sharp rise in oil prices, with Brent Crude now over $115 per barrel, is a major concern, as it drives up costs for consumers and businesses across various sectors. Additionally, the disruption to global supply chains caused by the conflict in the Middle East is exacerbating inflationary pressures. The Federal Reserve may feel compelled to raise interest rates aggressively to combat inflation, which could further stall economic growth.

  • In the past five weeks since the US-Israeli attacks on Iran, the risk of recession has risen significantly.
  • Goldman Sachs has raised its probability of a recession in the next 12 months from 25% to 30%.
  • Moody's Analytics has pegged US recession odds at just below 50%.
  • EY Parthenon has put the risk of a recession over the next year at 40%, warning the odds 'could rapidly rise' if the Middle East conflict worsens.

The players

David Goldman

A CNN contributor and Associate Director and Partner at Boston Consulting Group.

Hady Farag

An Associate Director and Partner at Boston Consulting Group.

David Rosenberg

The president of Rosenberg Research and a top economist who has been warning of recession risks since 2022.

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What they’re saying

“People are preparing themselves for the fact that we are already in a recession now or that there is a high likelihood we will soon be in one.”

— Hady Farag, Associate Director and Partner, Boston Consulting Group

“We could have a very significant recession in 2027 because business spending will face a vacuum.”

— David Rosenberg, President, Rosenberg Research

What’s next

Economists and analysts will continue to monitor the situation closely, particularly any further escalation of the US-Iran conflict and the Federal Reserve's response in terms of interest rate hikes. Businesses and consumers will also need to prepare for the possibility of a recession by cutting costs, reducing debt, and building up savings.

The takeaway

The looming threat of a recession underscores the fragility of the US economy and the significant impact that geopolitical tensions and energy price shocks can have. Policymakers, businesses, and individuals will need to take proactive steps to mitigate the potential fallout from an economic downturn, which could be exacerbated by the ongoing conflict in the Middle East.