Goldman Sachs Raises US Recession Odds to 30% Amid Iran War Oil Shock

Goldman Sachs raised its 12-month US recession probability to 30%, the third upward revision in 2026 and the starkest signal yet that the US-Israel war against Iran is reshaping the firm's core economic outlook. The move lifts the probability from 25% set earlier in March and from 20% at the start of the year, driven by a historic oil shock that followed the closure of the Strait of Hormuz on March 4.

The strait carries roughly 20 million barrels per day of crude oil and oil products, along with approximately one-fifth of global LNG trade. Its closure sent Brent crude surging more than 55% to over $112 per barrel by late March, up from roughly $65 to $71 in the days before US and Israeli forces launched strikes against Iran on February 28. Goldman's commodities team now forecasts Brent averaging approximately $85 for the full year, while analysts calculated that higher energy prices will push US headline inflation up 0.2 percentage points to approximately 3.1% by year-end.

The growth numbers are equally sobering. Chief economist Jan Hatzius and his team cut the full-year 2026 US GDP forecast to 2.1% on a Q4/Q4 basis, with H2 growth projected at only 1.25% to 1.75%, a range the firm describes as near "stall speed." US real GDP grew just 0.7% annualized in Q4 2025. Core PCE is now forecast at 2.5%.

The February 2026 jobs report added to the unease: non-farm payrolls fell by 92,000, unemployment edged up to 4.44%, and Goldman projects it will reach 4.6% by Q3 2026. The firm attributed the deterioration to insufficient job creation to keep pace with labor force growth, compounded by a 0.4 percentage point downward revision to labor force participation based on updated Census data.

Goldman's "Top of Mind" report, released March 20, warned that global assets were pricing in only "inflationary shocks" while "completely ignoring" the impact of high energy costs on growth, a dynamic it cautioned could shift toward "recession trading" if the conflict persists. IEA Executive Director Fatih Birol warned at the start of April that supply constraints are set to intensify further, offering little near-term relief to the base case that depends on oil price normalization.

Despite the revised odds, Goldman stresses that recession is still not its central scenario. The bank projects two Federal Reserve rate cuts in 2026, in September and December, arguing that oil shocks alone rarely prompt Fed tightening and that the US economy's reduced oil dependence limits second-round inflation effects. The federal funds rate is forecast to end 2026 at 3.00% to 3.25%.

Goldman's peers are considerably more pessimistic. Gregory Daco at EY-Parthenon puts recession odds at 40%, up from 35% before the Iran conflict escalated. Wilmington Trust stands at 45%. Mark Zandi at Moody's Analytics has the figure at nearly 49%, calling it close to a coin flip and warning it could top 50% if oil prices stay elevated; Moody's baseline under normal conditions is roughly 20%.

GS shares have dropped approximately 8.83% over the past month as the recession debate intensified, while the S&P 500 is down 3.4% year-to-date. Slower growth at stall speed compresses deal pipelines and hiring alike, the two levers that most directly determine year-end comp conversations across the firm's investment banking and advisory businesses. In 2023, Hatzius was among Wall Street's most bullish voices on recession risk, with his odds falling as low as 15%; his current 30% reading marks a sharp reversal, one that will keep climbing if the Strait of Hormuz stays closed.