Moody's Economist Warns US Recession Imminent Without Iran Agreement
WASHINGTON — The United States is facing serious economic risks if the conflict with Iran continues to trigger global energy shortages and price spikes. A leading economist has warned that prolonged oil market shocks have a high potential to drag the US economy into a recession.
Speaking to Bloomberg on Friday (29/05/2026), as cited by Al Mayadeen, Mark Zandi, Chief Economist at Moody’s Analytics, stated that the US economy has very limited time to avoid the adverse effects of ongoing increases in crude oil and petrol prices. According to Zandi, financial markets are currently heavily anticipating a diplomatic breakthrough with Iran to ease pressure on global energy markets and reverse the recent trend of rising oil prices.
“A peace agreement must happen very quickly—within one, two, or three days, or at least by next week. Once that momentum passes, I believe we will face very real problems,” Zandi remarked regarding the prospects of a peace treaty with Iran.
Threat of oil market shocks
Global crude oil prices are creeping upwards following concerns that increased regional tensions could disrupt global supplies. Analysts are particularly highlighting the Strait of Hormuz, a crucial transit corridor for international oil exports.
Zandi warned that persistent high fuel costs will begin to burden US consumers, potentially reducing purchasing power and slowing overall economic activity. He identified petrol prices exceeding $5 per gallon as a critical threshold that could trigger broader economic impacts.
“We are almost reaching that $5 per gallon mark. I believe that figure is enough to push this already fragile economy into a recession,” Zandi explained.
In addition to fuel prices, Zandi also highlighted the shrinking US oil reserves. According to data from the US Energy Information Administration (EIA), the US Strategic Petroleum Reserve (SPR) recently stood at 365 million barrels, the lowest level in approximately two years. He added that if crude oil prices break above $125 per barrel, it would serve as a strong signal that the risk of recession is becoming increasingly real.