Mark Zandi Warns Recession Risks Near 50% Due to Iran Conflict

Mar 26, 2026, 2:46 AM

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Mark Zandi, chief economist at Moody's Analytics, has expressed heightened concerns regarding the US economy, raising the recession outlook for the next 12 months to 48.6%. This warning reflects similar sentiments from other financial institutions, including Goldman Sachs, which estimates a 30% risk of recession, and EY-Parthenon, which places odds at 40%.

Prior to the recent US-Israeli military actions against Iran, economic indicators were already signaling trouble. A disappointing February jobs report revealed an unexpected loss of 92,000 jobs, defying expectations of a 60,000-job increase. This downturn dashed hopes for a labor market recovery, especially after the US had added just 181,000 jobs in the entirety of 2025. Additionally, the unemployment rate is creeping toward 4.5%, up from 3.4% three years ago, while wage growth has slowed, particularly for lower-income workers.

The ongoing conflict in the Gulf region has raised fears of an oil shock that could serve as the tipping point for a recession. Zandi noted, "Even before the conflict, I thought recession and risks were on the rise. Recession risks are very high—and unless the hostilities are coming to an end now, I think recession is more than likely by the second half of the year".

One of the main drivers of these recession fears is the rising cost of oil. Brent crude prices have surged from around $97 per barrel to a record-breaking $115 per barrel. Zandi warned that if oil prices average close to $125 per barrel in the second quarter, a recession could be imminent. He stated that with current elevated tensions, such oil price increases are plausible.

Despite President Trump's recent decision to postpone military strikes on Iranian energy infrastructure—which temporarily boosted stock prices by $1.7 trillion and reduced oil prices by $17—Iran has rejected US proposals for conflict resolution. The Pentagon has also ordered an additional 2,000 paramilitary troops to the Middle East, further escalating tensions in the region.

The implications of rising energy prices are stark, with comparisons being made to the oil shocks of the 1970s. During that time, Arab OPEC members cut oil production in response to US support for Israel, leading to a 40% spike in gas prices. Today, the situation is compounded by the ongoing closure of the Strait of Hormuz, a critical chokepoint for global oil and fertilizer exports. This has already led to increased fertilizer prices, which could affect food production and prices in the US, creating a correlation between rising energy costs and food inflation.

The International Energy Agency (IEA) has warned that the current turmoil in the Gulf is more severe than past crises, with a significant loss of oil production compared to historical figures. IEA Executive Director Fatih Birol noted that the world is currently losing 11 million barrels of oil daily due to the crisis, compared to 5 billion barrels during the oil crises of the 1970s. He emphasized that the depth of the current problem was not fully appreciated by global decision-makers.

Moreover, agricultural experts have pointed out the strong correlation between energy prices and food prices. As energy costs rise, so too do the costs of essential goods, potentially leading to increased grocery prices and further economic strain on American households.

In summary, the combination of rising oil prices and geopolitical tensions has created an environment of economic uncertainty, with analysts warning that the odds of a recession are climbing dangerously close to 50%. If the conflict continues without resolution, the implications for the US economy could be severe, affecting everything from job growth to food prices in the coming months.

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