Wall Street Collectively Bearish on 2026, Will an Oil Crisis Trigger an Economic Recession?

During the week of March 25, Moody’s Analytics, Goldman Sachs, J.P. Morgan, and Ernst & Pateron—four institutions using different methodologies—coincidentally raised the probability of a recession in the United States within the next 12 months to over 30%. Moody’s estimates it at 48.6%, Ernst & Pateron at 40%, J.P. Morgan at 35%, and Goldman Sachs at 30%.

This development is more significant than any individual number.

Four lines rising simultaneously

Moody’s Analytics’ machine learning model produced the highest figure. According to Fortune on March 25, Moody’s Chief Economist Mark Zandi stated that this number was only 15% in December 2023, rising to 42% by the end of 2024, jumping to 49% in February 2025, and the latest calculation is 48.6%. Zandi expects the next round of data will likely push this figure over 50%. The baseline recession probability typically ranges between 15% and 20%, so the current reading is nearly three times the normal level.

Goldman Sachs’ outlook is similarly steep. According to Fortune, Goldman’s forecast for December 2024 was 15%, which was adjusted upward to 20% in January, then to 25% on March 12, and by March 25, it had reached 30%. The pace of upgrading every two weeks is rare in Goldman’s historical forecasts. Goldman also raised its PCE inflation forecast by 0.2 percentage points to 3.1%, lowered its full-year GDP growth forecast to 2.1%, and delayed the first rate cut from June to September.

J.P. Morgan’s global research estimates a 35% probability. As reported by CNBC on March 19, J.P. Morgan’s economists also downgraded their year-end target for the S&P 500 from 7,500 to 7,200 points, with an extreme scenario potentially dropping to 6,000 points.

Ernst & Pateron was the last among the four to voice its estimate, but it included an interesting qualifier. According to World Oil on March 24, Ernst & Pateron Chief Economist Gregory Daco described the current situation as a “multi-dimensional disturbance,” because the impact extends beyond oil supply to affect refining systems, LNG infrastructure, and fertilizer supply chains. This means that even if oil prices fall back, inflationary pressures may not subside in tandem.

Historical success rate of oil price shocks

A common variable in all four institutions’ assumptions is oil prices. Since the U.S.-Israel strike on Iran on February 28, Brent crude has risen from about $70 per barrel to over $100 (the first time in four years), reaching a peak of $115 last week. As of March 25, it closed at $102.22.

According to the March report from the IEA, the Strait of Hormuz previously saw an average daily throughput of about 20 million barrels of oil, accounting for roughly 20% of global maritime oil trade. After the conflict erupted, Gulf countries cut oil production by at least 10 million barrels per day. Zandi estimated in an interview with Fortune that about one-third of the world’s fertilizer supply also passes through this route.

This level of energy shock has occurred four times in history.

According to J.P. Morgan research, of the five major oil price shocks since the 1970s, four triggered recessions afterward. The 1973 Yom Kippur War caused oil prices to surge 300%, and the U.S. entered recession in November of that year. The 1979 Iranian Revolution doubled oil prices, and a recession began in January of the following year. The 1990 Gulf War pushed oil prices up 180%, with a nearly simultaneous start to recession. During the super cycle from 2002 to 2008, oil prices increased by 592%, ending with the global financial crisis.

The current Strait of Hormuz crisis in 2026 has seen an approximate 80% increase, the smallest among these five shocks. But there is a key difference: this supply disruption is larger than any previous one. The IEA describes it as “the largest disturbance to energy supply since the 1970s energy crises.”

J.P. Morgan economists estimate that every 10% increase in oil prices tends to reduce U.S. GDP by about 15 to 20 basis points.

Fink’s binary outlook

On March 25, BlackRock CEO Larry Fink, who manages over $10 trillion in assets, offered a more straightforward framework in an interview with the BBC.

According to Fortune, Fink said: “There will be no middle ground; the outcome will be one of two extremes.”

The first scenario involves Iran being accepted by the international community, re-engaging in global trade, restoring oil supplies, and bringing prices down to around $40 per barrel, leading to global growth. The second scenario involves ongoing conflict, with the Strait of Hormuz blockade lasting for years, oil prices exceeding $100 and approaching $150, and the world entering recession. Fink specifically pointed out that the chain reaction of high oil prices would also impact agricultural products and fertilizers, as these are by-products of natural gas.

However, Fink also ruled out the possibility of a systemic financial crisis like 2008, noting that current financial institutions’ capital adequacy ratios are much higher than they were back then.

Consensus itself is a variable

Returning to the initial question: Moody’s uses machine learning models, Goldman Sachs employs macroeconomic forecasting frameworks, J.P. Morgan tracks five-factor indicators, and Ernst & Pateron approaches from a supply chain perspective. These four different methodologies converged on the same conclusion within the same week.

According to a March survey from the University of Michigan, consumer confidence index fell to 55.5, placing it in the 2nd percentile historically. BLS data shows that in February, U.S. non-farm employment decreased by 92,000, contrary to market expectations of a 60,000 increase. Leisure hotels decreased by 27,000, healthcare by 28,000, manufacturing by 12,000, and federal government employment decreased by 10,000. Since the peak in October 2024, federal employment has shrunk by a total of 330,000, an 11% decline.

Zandi said in an interview that if oil prices average around $125 per barrel in the second quarter, “that would push us into recession.” With Brent currently around $102, there’s about $23 left before reaching that threshold.

While these four institutions’ forecasts may not be precise, the fact that they arrived at similar conclusions within a single week using different methods carries more than just a probability number. Businesses may delay investment plans, consumers may tighten spending, and these behaviors can further depress economic data, causing the next round of forecasts to continue rising.