According to Moody’s Analytics, the U.S. recession risk is near a critical point, with its model showing a 49% probability over the next year. The firm also said the risk might be even higher due to the war in Iran and surging oil prices, Euronews reported.
The firm said its forecast for higher recession risk is based on weaker job growth, fewer building permits and lower consumer confidence. Moody’s Chief Economist Mark Zandi noted that recent U.S. job reports have been revised down, indicating the job market may be softer than initially reported.
The model highlighted that sudden increases in oil prices have historically triggered economic downturns. While the U.S. now produces roughly as much oil as it consumes, higher oil prices typically push up consumer and business costs, slowing economic growth. This negative effect on spending tends to occur more quickly than any potential benefit from increased domestic oil production.
Uncertainty surrounding the war in Iran is keeping oil markets under pressure. The ongoing blockage of the Strait of Hormuz — a critical route for global oil shipments — has helped push U.S. crude oil prices to about $94 per barrel. Continued disruption in this region could further tighten oil supplies and keep prices elevated, increasing costs for businesses and consumers and raising risks for the broader world economy.
Zandi said higher energy costs, combined with a weak job market, could reduce consumer spending and force businesses to cut back, potentially triggering an economic slowdown. He noted that while inflation alone is unlikely to cause a recession, high oil prices and weak employment together significantly increase the risk.
