The ongoing Israel-Iran conflict may further increase the risk of a U.S. recession.

Huitong Finance APP News - According to a report from Huitong Finance APP, due to the ongoing conflict between the U.S., Israel, and Iran, the U.S. economy is experiencing additional downward pressure. Several financial institutions have recently significantly raised the probability of a recession occurring in the next 12 months. This adjustment mainly stems from the rapid increase in international oil prices caused by the conflict, along with rising inflation expectations and deteriorating growth prospects. In normal years, the baseline probability typically hovers around 20%, but the current level has entered a high alert zone, indicating that geopolitical factors are becoming the dominant risk variable.

Moody’s Analytics’ latest model shows that the probability of a U.S. economic recession has risen to 48.6%, hitting a near-record high. The company’s chief economist, Mark Zandi, recently stated: “The concerning part is that the recession risk is high enough to be unsettling and is still rising. A recession is a real threat. If the current high oil prices persist until late May or the end of the second quarter, the U.S. economy will enter a recession.” His statement is based on AI-driven economic simulations, emphasizing that the rapid transmission characteristics of oil price shocks far exceed market expectations.

To provide a visual comparison of various institutions’ viewpoints, the following table presents the latest forecast data:

These data indicate that the risk of recession has shifted from a “low probability event” to a “real threat.” Although Goldman Sachs still views a recession as a non-benchmark scenario, it has lowered its GDP growth forecast for the year and warned that high oil prices, if maintained, will significantly suppress consumption and investment. Historical experience shows that almost all induced recessions have been accompanied by soaring oil prices; if this conflict cannot be quickly eased, the second quarter will become a critical observation window.

Further analysis reveals that the transmission chain of rising oil prices is clear and fierce: first, it directly pushes up costs for gasoline, transportation, and manufacturing, thereby suppressing disposable income for households and profits for businesses; second, it may force the Federal Reserve to adopt a more cautious approach to interest rate cuts, creating concerns about “stagflation”; finally, through financial market amplification effects, it leads to increased stock market volatility and a steepening yield curve. The job market has recently shown signs of cracks, and if consumer spending slows further, rising unemployment will create a vicious cycle.

At a global level, fluctuations in energy prices will also impact supply chain stability through commodity channels, exerting imported cost pressure on major economies such as Asian powers. Investors need to closely monitor oil price trends, U.S. economic data for the second quarter, and the progress of the conflict, as these variables will directly determine the extent to which the probability forecasts materialize.

Editor’s Summary

The latest models from several financial institutions consistently indicate that the U.S. economy is facing a significant increase in geopolitical-driven downside risks, with recession probabilities far exceeding normal levels. The persistence of high oil prices has become a core variable, and the final outcome depends on the speed of conflict resolution and monetary policy flexibility. The market needs to remain highly vigilant to respond to potential volatility.