Mark Zandi warns US economy faces higher inflation and slower growth
Updated
Updated · Fortune · May 5
Mark Zandi warns US economy faces higher inflation and slower growth
10 articles · Updated · Fortune · May 5
The Moody’s Analytics chief economist said recession odds reached 49% as the Iran war and a double blockade of the Strait of Hormuz drove energy and commodity prices higher.
He said even if the conflict ends within weeks, growth will stay below potential, job gains will be largely flat and unemployment will edge up, raising stagflation fears.
Zandi said higher fuel costs will lift delivery, airfare and food prices, while tariffs already reinstated under Section 232 are expected to trim long-run GDP and jobs.
The stock market hits record highs while recession odds climb. Which economic reality should Americans believe?
A global jet fuel crisis looms from the Iran war. Will international flights be grounded by summer?
With global crises mounting, can the Federal Reserve steer the U.S. economy clear of a full-blown recession?
Moody’s Vicious Cycle Index Signals 40-50% Recession Risk Amid Iran Conflict and Inflation Surge in May 2026
Overview
As of May 2026, the U.S. economy faces rising recession risks signaled by the Vicious Cycle Index, which accounts for hidden labor market weaknesses and suggests a 40-50% chance of near-term recession. This risk is intensified by the ongoing Iran conflict disrupting the Strait of Hormuz, pushing oil prices above $110 per barrel and fueling inflation. Inflation, driven by energy shocks and supply chain issues, disproportionately burdens lower-income households. Meanwhile, labor market growth slows due to reduced immigration and sectoral vulnerabilities, with businesses cautious about hiring amid uncertainty. Policymakers struggle to balance inflation control and growth, with outcomes hinging on geopolitical developments and timely policy actions.