Prediction markets showed rising odds of a U.S. recession in 2026 as the ongoing U.S.-Israel conflict with Iran drove oil prices above $100 per barrel and rattled global financial markets. Economists cited disruptions to oil supply—including Iran's partial closure of the Strait of Hormuz—along with declining consumer spending and stock market losses worldwide as key factors fueling recession concerns.

Daniel McDowell, Maxwell Advisory Board Professor of International Affairs, says he is concerned the conflict could “result in renewed attacks from the White House on the independence of the Federal Reserve. 

“As oil prices rise and put upward pressure on prices, this makes it less likely that the Fed will cut rates, something President Trump has been demanding for his entire second presidency. The appointment of Kevin Warsh was expected to deliver a monetary policy win for the White House, as the likely next Fed chair has signaled his view that rates are too high given the stagnant employment picture.”

Read more in the Newsweek article, “US Recession Odds Spike as Iran War Explodes.”