US Faces Recession Risk as Iran Deal Stalls, Oil Prices Surge

America has just days to secure a peace agreement with Iran or risk sliding into recession, according to Moody’s chief economist Mark Zandi. According to a report by Business Insider, speaking to Bloomberg, Zandi said that the increase in oil prices triggered by stalled negotiations has pushed the US economy to a critical threshold. Recently, Iran announced that it would halt negotiations and block the Strait of Hormuz until the important demands are met, sending Brent and US crude oil prices up by about 7%. This disruption threatens global energy supplies and has already driven the US national average gas price to $4.32 per gallon. Zandi has warned that if the prices climb to $5 per gallon, then consumer spending could collapse, tipping the US economy into recession.

Mark Zandi feels that peace deal must happen quickly

Zandi also emphasised that a peace deal must be reached within ‘the next day, to days, three days, next week or so.’ Beyond that, he said, ‘we’ve got a real problem’. He pointed to dwindling US oil reserves, with the Strategic Petroleum Reserve failing 365 million barrels the lowest in two years. Rising crude prices above $125 per barrel would mark another critical threshold signaling recession risk.

Flattening options for US President Donlad Trump

President Donald Trump has teased a deal for weeks but has yet to deliver concrete progress. Energy analysts at HFI Research echoed Zandi’s urgency, writing that “within hours, within days, Trump’s options and time are running out.” They warned that if the Strait of Hormuz remains closed by the end of June, global oil inventories will hit operational minimums, triggering severe economic damage.

Probability of recession rising

The New York Fed’s analysis showed the Treasury‑implied probability of a US recession within the next 12 months at 17% as of April. Zandi cautioned that without a peace deal, that probability could rise sharply as oil shocks ripple through consumer markets.

Mark Zandi warns of high risk of recession in America

Recently, Zandi warned that the United States is at a high risk of recession unless policymakers change the course on various key economic fronts. According to a report by Business Insider, speaking during a webcast hosted by Marcus & Millichap, Zandi said that the odds of a downturn in the next 12 months stand at about 40%, reflecting the fragile growth conditions. Zandi further argued that the biggest threats to the economy are ‘counterproductive policy choices’ such as broad-based tariffs, restrictive immigration measures, and foreign policy missteps. He also emphasised that the Federal Reserve must remain independent and avoid politically driven decisions. “It is the policy headwinds that are significantly raising the threat of recession,” he told Business Insider. Despite the elevated risk, Zandi also said that he still sees a path to sidestep a recession if the government pivots away from the damaging policies.