Iran war drags down the global economy! Goldman Sachs: U.S. recession risk rises to 30% this year

Ask AI · How does the tension in Iran exacerbate the risk of a U.S. economic recession?

Financial Association, March 24 (Editor: Liu Rui) Despite President Trump’s “calming signals” last night, the situation in the Middle East seems to remain tense after Iran repeatedly denied dialogue with the U.S., with energy prices still high and the outlook for the U.S. economy clouded as a result.

Goldman Sachs warns that as oil and gas costs rise, financial conditions tighten, and fiscal support wanes, the downside risk to U.S. economic growth is increasing, and the likelihood of a recession is also rising.

Increased Risk of U.S. Recession

Goldman Sachs Chief Economist Jan Hatzius and his team noted in their latest report that they currently estimate a 30% probability of a U.S. economic recession within the next 12 months, which is a 5 percentage point increase from their previous forecast.

Goldman Sachs expects U.S. GDP growth in the second half of the year to fall below trend levels, with an annualized growth rate between 1.25% and 1.75%.

The surge in oil and gas prices is a major driving factor, while geopolitical tensions and tightening financial conditions are exacerbating this impact.

In addition to the slowdown in economic growth, Goldman Sachs also predicts that the U.S. unemployment rate will rise to 4.6% by the end of the year.

However, Goldman Sachs remains relatively optimistic about the Federal Reserve’s policy path, believing that despite inflation risks, the Fed is still expected to cut interest rates in September and December.

Closure of Key Strait Will Continue to Push Up Oil Prices

Goldman Sachs’ commodity strategists currently predict that the Strait of Hormuz will be closed until mid-April. This will delay the peak of Brent crude oil prices and slow its subsequent decline.

Due to the continued disruption of the Strait of Hormuz, Goldman Sachs expects energy prices to remain elevated, which will push global inflation higher and cause a decline in global GDP by about 0.4 percentage points.

In the worst-case scenario, Goldman Sachs predicts that if the intensity of the conflict with Iran escalates, the economic losses for the U.S. could double or even triple.

While Goldman Sachs is concerned about the U.S. economy, the Atlanta Federal Reserve is also downgrading its expectations for U.S. economic growth— the Atlanta Fed has revised its forecast for the first quarter’s actual GDP growth (seasonally adjusted annualized growth rate) from 2.3% to 2.0%.

(Financial Association, Liu Rui)