U.S. economic outlook cut by Goldman over the Iran war — and the fear goes beyond oil

Economic Outlook - Goldman Sachs has reduced its economic growth outlook, now estimating a 25% chance of a recession within the next 12 months [2][3] Oil Price Impact - The primary risk to the U.S. economy is the price of oil, with Goldman’s oil team raising forecasts for Brent crude to an average of $98 for March and April, a 40% increase from the 2025 average [4] - A sustained 10% increase in oil prices is expected to raise the inflation rate by 0.2 percentage points and lower GDP growth by 0.1 percentage points [5] Financial Conditions - Tighter financial conditions are also affecting the economy, with a 1 percentage point tightening in the financial conditions index resulting in a 1 point reduction in GDP growth over the following year; currently, the index has tightened by 0.2 percentage points [6] Geopolitical Risks - Higher geopolitical risks negatively impact hiring and capital expenditure, and when combined with oil price shocks, the economic impact is significantly magnified [7] Resilience Factors - The U.S. economy is less dependent on oil than in the 1970s, and the stock market, as indicated by the S&P 500, is only down 1% this year, suggesting no significant negative wealth effect [8] - The U.S. economy is also less sensitive to key chokepoints in international trade, such as the Strait of Hormuz and Red Sea, which account for less than 5% of global trade [8]