Expectations that the United States will enter a recession in 2026 surged as the Iran conflict continued to widen across the Middle East, according to prediction markets.
In a statement to Newsweek on Monday, White House spokesperson Kush Desai said that President Donald Trump has “been clear about short term disruptions” amid the conflict, but that “Americans can rest assured that the best is yet to come.”
Why It Matters
The United States and Israel struck Iran in a military operation dubbed Operation Epic Fury on February 28 after failed talks between the U.S. and Iran to address Iran’s nuclear program. The strikes have continued in the days since and killed Iran’s supreme leader, Ayatollah Ali Khamenei. Seven U.S. service members have died in the conflict within its first 10 days.
The war also carries economic concerns, particularly around the cost of oil, which surged past $100 for the first time since 2022 as strikes across the region continued on Monday. U.S. futures were also down more than one percent ahead of Wall Street getting going early on Monday, despite Trump insisting oil price hikes were a “very small price to pay” to prevent Iran from becoming a nuclear weapons state.
What To Know
Prediction markets are increasing the probability of a U.S. recession as the Middle East conflict intensifies, pushing oil prices higher, unsettling financial markets and adding new uncertainty to an already fragile economic outlook. Trading markets reflect sentiment about current or future events, but are not necessarily predictive.
The odds of a 2026 recession increased in Kalshi’s and Polymarket’s prediction markets in recent days.
Kalshi’s market showed a 33 percent chance of a recession on Monday morning, up from 22 percent one week earlier, on March 2. That is still notably lower than in July 2025, when odds of a recession reached a high of 42 percent.
Polymarket tells a similar story—recession odds jumped to a 43 percent chance Sunday night but have since fallen back down to about 30 percent by Monday morning. That also marks an increase compared to recent weeks. On March 2, the market predicted a 22 percent chance of a recession; one month earlier, on February 9, recession odds stood at 27 percent.
The spike comes at a time when the U.S. economy had appeared to be stabilizing after two years of elevated inflation and aggressive Federal Reserve interest rate hikes. But the conflict has introduced a new level of volatility into markets and fueled fears that economic resilience could erode quickly if energy costs continue to climb.
Peter Simon, professor of economics at Salem State University, told Newsweek it is “risky” to predict the future but that it is “pretty safe to say that a world-wide economic crash has already started and will only get worse as this war goes.”
This is because the world “runs on oil” but also because wars “have a way of spreading which generally stops people from spending,” he said.
“Manufacturing around the world will break down, so spending and production will slow down everywhere including in the US. How bad a recession gets and how long it will last depends on how long this war goes on,” Simon added. “Every economic downturn is caused by a decrease in spending, and as this war continues the threat of a very serious recession becomes inevitable.”
Energy Prices Surge as War Spreads
Oil prices jumped sharply in the days after the U.S. and Israel launched strikes against Iran. On Monday, more than a week after the conflict began, U.S. crude oil futures surged to about $115 per barrel at the start of trading but had dropped back down to closer to $100.
Trump has sought to temper fears around oil prices.
“Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY! President DJT,” he wrote on Truth Social Sunday.
But rising oil prices still threaten pain at the pump, with gas prices rising to a national average of $3.478 per gallon on Monday, and for Americans using oil to heat their homes, as swaths of the country continue to face cool temperatures.
Higher oil prices can also filter through the economy in several ways, from costlier shipping and manufacturing to increased pressure on household budgets. That dynamic has raised concerns that inflation, which had been slowly easing, could pick up again—potentially complicating the Federal Reserve’s plans to cut interest rates later this year.
Iran significantly closed the Strait of Hormuz, a major shipping route for Middle Eastern oil, in retaliation for the strikes. This has strained supply and driven up oil prices worldwide.
GasBuddy’s head of petroleum analysis, Patrick De Haan, wrote in a post on his Substack Fuel Insights on Monday that fuel markets “are now rapidly recalibrating to the risk of prolonged disruption to global supply flows,” and that gas prices “could climb another 20 to 50 cents per gallon this week” in some states.
“While the situation remains highly fluid, consumers are already beginning to feel the impact as energy markets adjust to this sudden escalation,” he wrote.
Syracuse University professor Daniel McDowell told Newsweek one concern he has is that the conflict could “result in renewed attacks from the White House on the independence of the Federal Reserve.
“As oil prices rise and put upward pressure on prices, this makes it less likely that the Fed will cut rates, something President Trump has been demanding for his entire second presidency. The appointment of Kevin Warsh was expected to deliver a monetary policy win for the White House, as the likely next Fed chair has signaled his view that rates are too high given the stagnant employment picture.”
Global Stock Markets Tumble Amid Iran Conflict
Global stock markets have also taken a tumble. Stock markets in Europe and Asia fell on Monday morning. Japan’s Nikkei 225 was down 5 percent, while Europe’s Stoxx Europe 600 had also fallen nearly 5 percent from one week earlier.
In the U.S., both the S&P 500 and Dow Jones Industrial Average fell Monday morning as the conflict brought more uncertainty into the global economy.
In a Chatham House report last week, fellow Neil Shearing warned that key risks “surround disruptions to the supply of goods that economies in the region send to the rest of the world.”
“One final consequence of the conflict is that it is likely to reinforce a broader pattern in the world economy: the relative strength of the United States. Having moved from a large net importer of energy to a modest exporter, the US is now less exposed to global energy shocks than many of its peers. While American households will still face higher fuel prices, energy producers – and their investors – stand to benefit,” he wrote.
What People Are Saying
White House Spokesman Kush Desai told Newsweek: “The President has been clear about short term disruptions due to Operation Epic Fury even as U.S. and allied forces make stunning progress against the Iranian terrorist regime. The long run trend, however, has been clear: President Trump’s economic agenda continues to unleash robust private sector job, investment, and economic growth that’s driving America’s resurgence. As the President’s tax cuts and deregulation continue taking effect, and as trillions in investments continue materializing, Americans can rest assured that the best is yet to come.”
Senate Minority Leader Chuck Schumer, a New York Democrat, in a statement: “The Strategic Petroleum Reserve exists for moments exactly like this. When wars and global crises disrupt energy markets, the United States has the ability to act, but President Trump and his administration are refusing to do so. Trump should release oil from the SPR now to stabilize markets, bring prices down, and stop the price shock that American families are already feeling thanks to his reckless war.”
Statistician and political analyst Nate Silver, in a blog post: “Although the United States is less reliant on foreign oil than it once was, the war in Iran could be a perfect storm for gas and energy prices in the U.S. and elsewhere to spike…Americans are used to gas price fluctuations, but it’s not all that common for prices to go quite this vertical in the span of a month.”
What Happens Next
The price of oil and gas may become a sticking point for Trump, who sought to emphasize affordability and inflation during his 2024 reelection campaign.
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Update 3/9/26, 5:43 p.m. ET: This article was updated with additional information.
Newsweek may earn an affiliate commission if you sign up through any links in this article. See the prediction market operator’s terms and conditions for important details. The probabilities referenced in this story are correct at the time of publication and are subject to change.
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