Recession odds climb as oil tops $100 amid Iran war

Betting markets are now putting roughly a four-in-ten chance on the United States falling into a recession before the end of 2026, as oil crosses $100 a barrel for the first time in nearly four years and the conflict between the U.S., Israel, and Iran disrupts energy supplies around the world.

On Polymarket, traders put the odds of a U.S. recession by the end of 2026 at about 32%.

That market pays out if the Bureau of Economic Analysis records two straight quarters of negative real GDP growth between Q2 2025 and Q4 2026, or if the National Bureau of Economic Research formally declares a recession.

Kalshi, a rival prediction platform, puts the figure at around 32.5% for 2026. Both numbers have jumped sharply in recent weeks.

The rising U.S.-Israel-Iran confrontation, which has reduced the world’s oil supply, is the cause of the spike.

Following the closure of the Strait of Hormuz, the reduction of production by key Middle Eastern producers, and the spread of concerns about additional conflict in commodity markets, oil prices surpassed $100 per barrel.

Experts caution that a protracted closure would result in a supply shock not seen since OPEC dominated global energy in the 1970s.

Approximately 20% of the world’s oil supply passes through the Strait. A prolonged closure would ensure a worldwide recession, a former White House energy adviser said CNBC on Saturday.

Wall Street split on recession risk

Wall Street is divided on what comes next. Ed Yardeni, president of Yardeni Research, told clients Monday that the oil spike tied to the Iran war has raised the risk of a stock market “meltdown”, a scenario he has previously compared to the early-2000s crash.

He also now puts a 15% chance on a repeat of 1970s-style stagflation, a scenario he said was not even on his radar before the conflict broke out. Stagflation, where inflation rises while growth slows, is widely seen as one of the worst situations an economy can face.

“The U.S. economy and stock market are stuck between Iran and a hard place currently,” Yardeni said.

“If the oil shock persists, the Fed’s dual mandate would be stuck between rising inflation and rising unemployment.” He added that while spiking oil prices could trigger a market correction, a full bear market is also possible.

According to economist Peter Schiff, rising oil prices will trigger a recession on their own, and the monetary and fiscal responses will exacerbate inflation.

He cited the recessions of 1973–1974 and 1990 as instances in the past where a sharp increase in oil prices caused the economy to decline.

JPMorgan CEO Jamie Dimon refused to rule out a U.S. recession in 2026, even as GDP grew 3.8% in Q2 2025.

According to the 2026 market outlook report, his comments track JPMorgan’s 35% downside scenario. Auto stocks took an immediate hit from the Middle East shock, with Ford, GM, and Stellantis all sliding sharply, while gold prices climbed alongside oil.

Not everyone on Wall Street sees a downturn ahead. A report by Goldman Sachs published at the start of the year projected real GDP growth of 2.6% for 2026, well above the broader market consensus of 2.0%, with AI investment cited as a key engine.

Morgan Stanley expects the economy to slow in the first two quarters of 2026 before picking up speed in the second half, helped by consumer spending and easier monetary policy.

Annual global economic growth is expected to moderate to 3.2% in 2026.

Jobs data adds to the pressure 

Still, the jobs picture has darkened. Cryptopolitan reported earlier this month that the U.S. economy shed 92,000 jobs in February, according to the Bureau of Labor Statistics, pushing the unemployment rate to 4.4%.

The total number of unemployed Americans reached 7.6 million. Unemployment among adult men stood at 4.0%, adult women at 4.1%, and teenagers at 14.9%.

U.S. stock futures were lower in early Monday trading, with S&P 500 futures down 1.4%.

The road ahead for policymakers is uncertain, with weakening jobs data, rising energy prices, and market stress all hitting at once.

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