<div id="readability-page-1"><div>[NEW YORK] Wall Street is cutting its forecasts for the US economy this year, boosting its projections for inflation and unemployment and nudging up the odds of a recession as the impact of the Iran war starts to come into view.Goldman Sachs says the risk of a downturn over the next 12 months has risen to 30 per cent as a result of the surge in oil prices, and predicts the jobless rate will climb to 4.6 per cent by the end of 2026 from 4.4 per cent in February. Several firms say inflation will now be closer to 3 per cent this year than 2 per cent, eating into disposable incomes and keeping a lid on hiring.That’s a shift from what was supposed to be a strong year in 2026 as the shock of US President Donald Trump’s tariffs faded into the background and stimulus from tax cuts kicked in. Even if the fighting ends soon, economists say the damage already done will keep the US economy on a narrow footing, with job seekers and lower-income consumers alike continuing to struggle.“Lots of elements of the economy are going to be weaker because of this war,” said Nancy Vanden Houten, the lead US economist at Oxford Economics.“The impact is very visible very quickly,” Vanden Houten said. “You just have to drive by your local gas station.”Tax refunds, amped up by Trump’s One Big Beautiful Bill Act, have helped blunt the blow. But forecasters are starting to expect the increase in refunds, a key element underpinning sunny forecasts for consumer spending in 2026, will be effectively neutralised by higher energy costs.The price of petrol has surged more than 30 per cent so far this month to about US$4 a gallon, according to the American Automobile Association, marking the biggest increase since Hurricane Katrina knocked out Gulf Coast oil production in 2005.Early data on tax refunds, meanwhile, are coming up short of expectations. In a Mar 23 report, Morgan Stanley economists estimated refunds are tracking 12 per cent higher than last year, below the 15 to 25 per cent increase they had anticipated. The bank downgraded its forecast for consumer spending, projecting a 1.7 per cent increase in 2026 instead of 2 per cent.“The oil shock essentially washes out that bump that we were counting on,” Morgan Stanley’s Arunima Sinha said.That leaves the US on track for growth of around 2 per cent in 2026 by most accounts, thanks in large part to ongoing investments in data centres that is seen as relatively insulated from costly imported energy thanks to America’s abundance of cheap natural gas.But it keeps the economy dependent on continued investor optimism towards artificial intelligence, and the associated spending by top earners, buoyed by growing portfolios that helped keep the expansion going in 2025 despite near-zero job growth.Oil prices have eased somewhat amid a diplomatic push by the US to end the war with Iran, though Brent crude remains around US$100 a barrel. Even if the two sides can come to an agreement to end hostilities soon, forecasters caution it will take time for oil shipments through the Strait of Hormuz to ramp up. Damage to oil infrastructure in the region, combined with increased global demand as countries rebuild stockpiles after the conflict, will also sustain higher oil prices than before the war.American consumers can already see the impact when buying petrol or plane tickets. But a growing fertiliser shortage created by the war is also set to push food prices up as the year goes on. Higher prices for diesel fuel, which have risen even faster than regular gas, will add to shipping costs, which could also eventually boost a whole range of prices for consumer goods that were already boosted by tariffs.“Everyone’s very concerned about how long it’s going to take before things are settled,” said Jennifer Lee, a senior economist at BMO Capital Markets. “Even if it does get settled today, it’s going to take some production. It’s going to take a long time to have things restart.”Many economists see less spending translating to less hiring, which means another year of meagre gains for employment after 2025 registered unprecedented low job growth so far into an economic expansion.<h2>Consumer impact</h2>Several Wall Street firms, including Citigroup, are forecasting a rise in the unemployment rate this year. That’s one reason why many are sticking with their calls that the US Federal Reserve will resume interest-rate cuts at some point in 2026, even as investors have rushed in recent days to bet on rate hikes instead.Slower job growth also could feed back into the outlook for consumer spending, said Gisela Young, an economist at Citi.“To the extent that job growth continues to slow further – it’s already on average sort of a zero – that could be another headwind to the consumer,” Young said, adding that Citi expects wage growth to step down again this year.Early signs of the impact are more mixed than the quickly souring outlook would suggest. Economists at JPMorgan Chase and Bank of America say weekly internal data on credit-card spending show little evidence of a slowdown as at mid-March, suggesting consumers have yet to start pulling back even as they pay more at the pump.The University of Michigan will release final results from its monthly survey of consumer sentiment on Friday. Forecasters expect it to show a decline in March, according to the median estimate in a Bloomberg survey, though not to the level seen in November, which marked the lowest reading in more than three years.“The first two weeks of the conflict, you are not seeing anything really pronounced in terms of changes in consumer spending,” said Michael Feroli, the chief US economist at JPMorgan. But “I do think this takes a little bit of pep out of the expansion.” BLOOMBERG</div></div>

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Wall Street is revising its US economic forecasts downward, raising recession risks to 30% due to the Iran war's impact on oil prices. Goldman Sachs predicts unemployment will rise to 4.6% by 2026, while inflation is expected to hit 3%. Tax refunds are lower than anticipated, affecting consumer spending growth. Oil prices have surged over 30% this month, impacting costs for consumers and businesses. Economists warn that even if the conflict ends, the economic recovery will be slow, with potential job growth remaining weak and higher prices for goods likely.

- Wall Street is lowering its economic forecasts for the U.S. in 2026, raising expectations for inflation and unemployment while increasing recession risks due to the effects of the Iran war.  
- Goldman Sachs predicts a 30% risk of economic decline in the next 12 months, with unemployment expected to rise from 4.4% to 4.6%, and inflation closer to 3%.  
- Despite efforts to end the conflict, high oil prices continue to impact consumer spending and economic growth, suggesting a challenging outlook for low-income consumers and job seekers.

US recession risks begin to rise as war dims economic outlook