US Economy | Moody's: If Oil Prices Remain Elevated for Several Weeks, US Recession Probability Could Exceed 50%

SighingCashier · 2026-03-17T03:00:55+00:00

Middle East tensions persist, with Iran blocking the Strait of Hormuz causing oil prices to surge. Moody's economist Zandi warns that if oil prices remain elevated, the U.S. economy risks entering a recession. Despite the U.S. producing and consuming comparable amounts of oil, global market turmoil will still deal a heavy blow to the economy, with recession probability forecast to exceed 50% over the next 12 months. A weakening labor market and slowing GDP growth compound economic pressures, potentially bringing new inflationary shocks. History shows oil price increases often precede economic recessions.

SighingCashier

2026-03-17 03:00:55

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The ongoing conflict in the Middle East and Iran’s blockade of the Strait of Hormuz have caused oil prices to surge. Moody’s Chief Economist Mark Zandi believes that if oil prices remain high in the coming weeks, the United States will find it difficult to avoid an economic recession.

Zandi stated that as long as the Strait of Hormuz remains closed to oil tankers, the outlook for the U.S. economy will continue to worsen. Although the U.S. currently produces roughly as much oil and natural gas as it consumes, turbulence in the global energy markets could still have a significant impact on the U.S. economy.

Before the Iran conflict erupted, Moody’s machine learning-based leading indicators already showed a 49% chance of a recession in the next 12 months. Now, Zandi expects that when the model releases its next data, the recession probability could rise to 50% or higher.

Recent weak labor market data has been a major factor dragging down the U.S. economic outlook. However, Zandi said that besides employment figures, several other economic indicators have also started to weaken over the past few months. Official data shows that U.S. GDP grew only 0.7% in the fourth quarter last year, indicating a clear slowdown in economic momentum. Zandi pointed out that the Iran war could further intensify economic pressures, potentially bringing a new wave of inflation to American consumers already under high price pressures.

Zandi also warned that historical experience shows that rising oil prices are often a precursor to recession. Since World War II, except for the brief recession triggered by the COVID-19 pandemic in 2020, every U.S. recession has been accompanied by a significant increase in oil prices.

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