Iran War Drags Down Global Economy! Goldman Sachs: U.S. Recession Risk Rises to 30% This Year

Despite the "de-escalation signal" released by President Trump last night, tensions in the Middle East do not appear to have eased significantly following Iran's repeated denials of dialogue with the United States. Energy prices remain high, casting a shadow over the U.S. economic outlook.

 

Goldman Sachs warned that downside risks to U.S. economic growth are mounting as oil and gas costs rise, financial conditions tighten, and fiscal support wanes, simultaneously increasing the probability of an economic recession.

Rising U.S. Recession Risk

Goldman Sachs Chief Economist Jan Hatzius and his team noted in their latest report that they now believe the probability of a U.S. recession within the next 12 months is 30%, up 5 percentage points 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%.

 

Specifically, the surge in oil and gas prices is the primary driver, while geopolitical tensions and tightening financial conditions have exacerbated this impact.

 

In addition to the slowdown in economic growth, Goldman Sachs also expects the U.S. unemployment rate to 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 Drive Up Oil Prices

Goldman Sachs commodity strategists currently expect the Strait of Hormuz to remain closed until mid-April. This will delay the timing of the peak in Brent crude prices and slow its subsequent decline.

 

Due to the continuous disruption of the Strait of Hormuz, Goldman Sachs expects energy prices to remain high, which will drive up global inflation and reduce global GDP by approximately 0.4 percentage points.

 

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

 

While Goldman Sachs worries about the U.S. economy, the Federal Reserve Bank of Atlanta is also lowering U.S. economic growth expectations—the Atlanta Fed's forecast for U.S. real GDP growth in the first quarter (seasonally adjusted annualized rate) has been lowered to 2.0% from the previous 2.3%.