The outlook for the U.S. economy is getting worse by the day as long as the Strait of Hormuz stays closed to oil tankers. Even though the United States now produces roughly as much oil and natural gas as it consumes, prolonged high energy prices could push the country into a recession, according to Mark Zandi, chief economist at Moody’s.
Zandi warned that if the current situation does not improve within the next few weeks, a recession may become almost impossible to avoid. Before the recent conflict with Iran began, Moody’s leading economic indicators already showed a 49% chance of a recession starting within the next 12 months. Zandi now expects that probability to rise to 50% or higher in the next update.
“Recession is once again a serious threat,” Zandi wrote on X.
Weak Economy Meets New Shock
The U.S. economy was already showing clear signs of strain before the escalation in the Middle East. Weak job numbers and other slowing indicators had been dragging down the outlook for months. Official data revealed that the economy grew at a sluggish 0.7% pace in the fourth quarter of 2025.
The war with Iran has made the situation worse by threatening to drive up inflation again. Higher oil prices hit American consumers quickly and hard, even in a country that is now energy self-sufficient on paper.
Zandi pointed out a troubling historical pattern: since World War II, nearly every U.S. recession — except the short COVID-19 downturn — was preceded by a sharp rise in oil prices. While not every oil spike causes a recession, the current timing is especially dangerous because the economy was already weakening.
Different Views Among Economists
Not all economists are as concerned as Zandi. Many investment banks still put the odds of a recession between 30% and 40%. Yardeni Research recently increased its forecast for a market downturn this year from 20% to 35%.
However, Zandi believes the risks are higher. He noted that many experts had predicted a recession after the Federal Reserve raised interest rates aggressively a couple of years ago, but they turned out to be wrong at the time. This time, he says, the combination of a slowing economy and sustained high oil prices is far more threatening.
“If oil prices remain elevated for much longer (weeks and not months), a recession will be difficult to avoid,” Zandi stated.
Markets Not Fully Pricing In the Danger
Wall Street does not yet appear to be preparing for a full recession. The S&P 500 rose about 1% on Monday to 6,699.38 — its biggest one-day gain since early February — while the Dow Jones Industrial Average and Nasdaq Composite also posted modest gains. Still, the S&P 500 remains below its record high set in January.
Zandi’s warning serves as a clear reminder that the next few weeks will be critical. If the Strait of Hormuz stays blocked and oil prices remain high, the U.S. economy could soon face its most serious downturn in years.
