\n Economists warn that the war has increased the risk of a recession. And the longer the crisis lasts, the greater the danger to an economy that already looked vulnerable before the chaos in the Middle East.\n <\/p>\n
\n \u201cThe US is and has been on the precipice of recession for quite some time. It only requires one thing to knock us over. Could oil do it? Absolutely,\u201d said Justin Wolfers, an economics professor at the University of Michigan.\n <\/p>\n
\n Though the war could do real damage to the US economy, most economists don\u2019t expect a recession.\n <\/p>\n
\n The stock market has retreated, but not dramatically enough to imply that Wall Street is penciling in an imminent downturn.\n <\/p>\n
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\n And if there is a quick end to the closure of the Strait of Hormuz, oil prices would likely return toward pre-war levels.\n <\/p>\n
\n Still, the odds of a recession this year<\/a> spiked to as high as 35% early on Monday, when US oil prices briefly hit as high as $119 a barrel, according to prediction market Kalshi. That\u2019s up from about 20% in early February before the US military build-up in the Middle East.\n <\/p>\n \n \u201cThe risk of a recession has materially increased, but we\u2019re not there yet. The US is a $30 trillion dynamic and resilient beast. It has plenty of room to absorb an oil-based shock,\u201d said Joe Brusuelas, chief US economist at RSM.\n <\/p>\n \n The key thresholds for a recession, according to Brusuelas, are if oil prices jump to $125 a barrel, gas prices climb to $4.25 a gallon and inflation heats up to 4% a year.\n <\/p>\n \n Gas prices have already surged by 50 cents, going from $2.98 a gallon before the war started to $3.48 a gallon on Monday.\n <\/p>\n \n \u201cThe speed with which it\u2019s hitting gas stations has left consumers shocked,\u201d Diane Swonk, KPMG\u2019s chief economist, told CNN\u2019s Zain Asher on Monday. \u201cBut it would need to get a lot worse\u201d to get to a recession.\n <\/p>\n \n Every sustained $10-a-barrel increase in oil prices could cost the typical US household close to an extra $450 annually, according to Moody\u2019s Analytics chief economist Mark Zandi.\n <\/p>\n \n The hit to household budgets is key because the US remains a consumer-led economy.\n <\/p>\n \n If Americans cut back on shopping, traveling and going out to eat, businesses would be forced to lay off workers, causing consumers to cut back further. That can become a doom loop that ends in recession.\n <\/p>\n \n And the job market looks more vulnerable than in 2022, when there was an oil price shock from Russia\u2019s invasion of Ukraine. Back then, the economy was adding hundreds of thousands of jobs per month.\n <\/p>\n \n Flash forward to today: The US economy added just 116,000 jobs for all of 2025, the lowest outside of a recession since 2002. In fact, the economy has lost jobs in five out of the past nine months<\/a>, after going years without a month of job losses.\n <\/p>\n \n The job losses and surging gas prices are \u201ca very nasty one-two punch to the economy,\u201d said David Kelly, chief global strategist at JPMorgan Asset Management. \u201cBut I still bet that the economy will muddle its way through this.\u201d\n <\/p>\n \n Kelly pointed to expectations for bigger tax refunds to American families made possible by the One Big Beautiful Bill, President Donald Trump\u2019s signature tax and spending law.\n <\/p>\n \n \u201cIt\u2019s just a pity that people will have to spend so much of their tax refunds just to fill up their SUVs,\u201d said Kelly.\n <\/p>\n \n A second related risk is that the war and energy price spike cause a bear market, with US stocks seeing a 20% decline from prior highs.\n <\/p>\n \n A market plunge would likely depress spending \u2014 even by the affluent families carrying the weight of today\u2019s K-shaped economy.\n <\/p>\n \n \u201cI don\u2019t even think oil has to go to $120 or $150 a barrel. If it just stays at $100 and pushes the stock market lower, it could have an adverse impact on higher-income and higher-wealth consumers,\u201d Ed Yardeni, president of investment advisory Yardeni Research, told CNN in a phone interview on Monday.\n <\/p>\n \n Yardeni still thinks the United States will avoid a downturn. But the risk of a negative wealth effect is one reason that on Monday he upped his odds of a market \u201cmeltdown\u201d that includes a recession from 5% to 20%.\n <\/p>\n \n A third pathway to a recession would be through a major blow to business confidence.\n <\/p>\n \n It\u2019s easy to see how employers, who were already on the fence about hiring or expanding, would be deterred by a sustained oil price gain.\n <\/p>\n![\"People](\"https:\/\/www.newsbeep.com\/ie\/wp-content\/uploads\/2026\/03\/gettyimages-2263925951.jpg\")
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