The United States’ economy has faced plenty of twists and turns in the first quarter of 2026, but what’s next for GDP at a time of increased geopolitical uncertainty following the escalation of conflict in Iran?
Since the flare-up of the conflict in Iran back in late February, the economy has faced fresh inflation pressures in a way that’s derailed the ambitions of investors who had been expecting Federal Reserve rate cuts throughout the year.
Recently, Michael Feroli, chief US economist at JPMorgan, forecasted that there will be zero rate cuts throughout 2026 as a result of the conflict and oil price hikes due to the closure of the Strait of Hormuz in Iran. Instead, Feroli believes that the next Fed move would be a 25 basis point hike in Q3 2027, which would take the upper band of federal funds rates to 4%.
Despite this, Institute for Supply Management data suggests that the US economy had begun the year in a healthy state, growing at a 2.5% annual pace in 2026.
However, conflicting job reports and inflation fears appear set to remain strong headwinds for the economy looking ahead. But could upbeat industry figures help firms to out-innovate their economic challenges should uncertainty continue to hamper prospects?
Economic Headwinds Build
Given that there is still no clear indication of when the war in Iran will end, there is plenty of uncertainty about how much longer the US economy will have to face volatility arriving from the Middle East.
Disruptions to the global supply of oil and liquefied natural gas persist while the Strait of Hormuz remains closed, creating significant inflationary pressures to add to the economic fallout of going to war.
In early March, the price of crude oil reached a peak of $118, representing an increase of $67 from before the US and Israel began their campaign in Iran. Given that the majority …
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