Wall Street economists are warning that the economy is in danger of tripping into a recession, particularly after the war with Iran sent the international benchmark price for oil surging above $100-a-barrel.
“Oil prices are an important variable,” wrote Moody’s Analytics Chief Economist Mark Zandi, pointing out that “every recession since WWII, save the pandemic recession, has been preceded by a spike in oil prices.”
If the price per barrel remains elevated into the summer, Zandi sees the economy contracting. Moody’s Analytics’ forecasting model says there’s a nearly 50 percent chance the U.S. will fall into recession by early 2027.
Economists at Wilmington Trust say the chances of recession stand at 45 percent, while Goldman Sachs has raised its recession risk to 30 percent.
Even if a recession fails to materialize, fears that the economy will severely stumble can drive the stock market into a tailspin as investors anticipate a sharp impact on corporate profits.
High energy prices—not just gasoline, but also heating oil and electricity—are squeezing consumers. Meanwhile, the cost of food is rising at an annual rate of more than three percent and may move significantly higher as a fertilizer shortage caused by the war impacts food prices. Shipping costs for goods are also climbing due to higher prices for diesel fuel.
As prices escalate, the job market has been stagnant. The number of new jobs in the U.S. grew by only 116,000 in 2025 and showed little improvement in the first few months of 2026.
That is weighing on consumer sentiment. Prior to the Iran war, a NerdWallet survey found 65 percent of those surveyed expect a recession in the next 12 months. Since the outbreak of the Iran war, the University of Michigan sentiment index has declined. “The persistence of high prices continues to be the dominant factor for consumer views of the economy, with 47 percent of consumers spontaneously noting that prices are currently eroding their personal finances,” said Joanne Hsu, director of the survey.
The global economy is at risk as well. If oil prices rise to $140 a barrel and remain at that level for two months, Oxford Economics predicts there will be a global recession.
