Oil prices have surged 26% since the U.S.-Iran war began on February 28, pushing Wall Street to raise recession odds. Higher oil prices pose widespread problems for the economy and could bring inflation to 5% while dragging down gross domestic product (GDP) by 1% or more, according to EY-Parthenon Chief Economist Gregory Daco.
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JPMorgan, Goldman Warn of Recession Risks
Earlier this week, JPMorgan lowered its 2026 year-end S&P 500 (SPX) price target to 7,200 from 7,500, warning that elevated oil and gas prices could depress consumer demand. Head of Global Markets Strategy Dubravko Lakos-Bujas added that oil spikes of 30% or greater have historically preceded recessions.
In addition, Goldman Sachs raised its recession odds to 30% from 25%, citing the closure of the Strait of Hormuz and a higher unemployment rate projection of 4.6% by year-end. The firm also raised its December 2026 personal consumption expenditures (PCE) inflation forecast to 3.1% from 2.9%.