Goldman Cuts US GDP Forecast as Iran War Pushes Oil to $101

Edgen Stock·Mar 13 2026, 00:19

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Key Takeaways

Goldman Sachs has downgraded its U.S. economic outlook, citing rising oil prices and geopolitical risk from the conflict in Iran. The bank raised its recession probability and now expects a more hawkish Federal Reserve, pushing back the timeline for anticipated interest rate cuts.

Goldman Sachs revised its U.S. economic outlook, lowering its Q4 GDP forecast to 2.2% and increasing its recession probability to 25%.
The primary driver is the price of oil, with Brent crude hitting $101 per barrel and forecast to average $98, a 40% increase from the 2025 average.
The new inflationary environment has caused Goldman to predict the Federal Reserve will delay rate cuts until September and December 2026.

Goldman Slashes US Growth Forecast to 2.2% on Oil Shock

Goldman Sachs cut its U.S. economic growth forecasts on March 12, 2026, warning that the escalating conflict in Iran presents significant headwinds. The bank's economists, Manuel Abecasis and David Mericle, now project fourth-quarter year-on-year GDP growth at 2.2%, a reduction of three-tenths of a point. They also lifted their 12-month recession probability to 25%.

The downgrade is directly tied to soaring energy costs. Brent crude, the international oil benchmark, has already touched $101 per barrel, and Goldman's commodities team now expects it to average $98 through March and April—a 40% increase from the 2025 average. The bank's model indicates that a sustained 10% increase in oil prices lowers GDP growth by a tenth of a percentage point while boosting headline inflation by 0.2 points. The conflict's impact extends beyond oil, tightening financial conditions and weighing on business investment.

The main transmission channel from the war with Iran to the U.S. economy is the price of oil.

— Manuel Abecasis and David Mericle, Goldman Sachs Economists.

Fed Rate Cuts Delayed as Inflation Forecast Jumps to 2.9%

The prospect of sustained energy prices has forced a significant revision to inflation expectations. Goldman now projects the year-end Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge, will reach 2.9%. This is 0.8 percentage points higher than its previous forecast and substantially above the central bank's 2% target. Consequently, the bank now anticipates the Fed will delay interest rate cuts, pushing them from a June and September timeline to September and December.

The risk-off sentiment is rippling across financial markets, though the impact has been uneven. While the S&P 500 is down only 1% year-to-date, signaling a lack of broad panic, investors are fleeing higher-risk assets. Crypto-based exchange-traded funds saw significant withdrawals, with Bitcoin ETFs losing $349 million and Ethereum ETFs shedding $83 million. In contrast, sectors that benefit from supply disruptions, such as fertilizer producers CF Industries and Mosaic, have seen their stock prices climb as investors reposition for a period of heightened geopolitical tension and commodity inflation.