Goldman Sachs lowers U.S. recession odds as markets bend, not break

Goldman bankers spent the past week explaining a paradox: the headlines around Iran, oil and shipping looked severe, but the market reaction looked contained. In its May 11 Global Views note, Goldman Sachs Research cut its 12-month U.S. recession probability to 25% from 30%, arguing that the global economy has bent under the shock but has not broken.

The note said the 10-week closure of the Strait of Hormuz has hurt growth only moderately so far because oil prices did not jump as sharply as feared, markets were already prepared for policy responses if consumer prices accelerated, and financial conditions, the AI boom and fiscal policy remained supportive. Goldman’s baseline assumes a gradual reopening that starts soon and finishes in late June. Under that path, Brent crude should stay stable near term and drift to about $90 a barrel by year-end, even as oil-price risks remain skewed to the upside.

For client-facing teams, that framing matters. Commodities and energy desks can point to Goldman’s own oil work, which estimated that Hormuz disruption could lift crude by roughly $1 to $15 a barrel depending on how much of the strait is blocked and for how long. Banking teams can use the note to explain why geopolitics has not yet derailed the cycle, while sales teams can answer the next round of questions about whether AI spending and easy financial conditions are enough to keep earnings and deal activity intact.

The recession call was not based on optimism alone. Goldman pointed to resilient economic activity, an improved financial-conditions index, solid growth in private domestic final sales and a stronger-than-expected April labor report. The U.S. Bureau of Labor Statistics said nonfarm payrolls rose by 115,000 in April and the unemployment rate held at 4.3%, a combination that helped reinforce the more resilient growth read. Still, Goldman said recession risk remains above its pre-war level and above the long-term average, with consumer spending vulnerable later if real income and cash flow weaken.

That is the line employees will likely hear from clients now: watch oil, watch shipping, watch financial conditions, and watch whether consumer demand starts to crack. Reuters reported that Goldman and Bank of America both pushed back expected Fed rate cuts the same day, showing how quickly the firm’s macro view was feeding into near-term policy and market expectations. Goldman’s message to the Street was simple enough for every coverage team to use: the shock is real, but the cycle is still standing.