Moody’s Analytics chief economist Mark Zandi said that oil prices would only need to average close to $125 per barrel in Q2 to tip the U.S. economy into recession.

WTI is trading around $89, but with the Strait of Hormuz still closed, that number could be reached quickly.

What Happened

Recession probabilities are high and rising, Zandi said on X, but the firm’s baseline still doesn’t call for an outright downturn unless the price of oil increases.

Zandi called the $125 scenario “not a stretch” given the state of the Middle East.

Between the firm’s February forecast, done before the Iran conflict, and its March outlook at the start of hostilities, Moody’s raised its 2026 oil price forecast by nearly $15 per barrel.

That alone shaved close to 20 basis points off real GDP growth expectations for the year.

What Prediction Markets Are Pricing

On Kalshi, the ‘How high will WTI oil get by the end of the year?’ contract prices $125.01 oil at 45%. However, Zandi notes that oil wouldn’t just need to hit that mark to trigger a recession: it would have to stay elevated.

Worryingly, the probability that oil hits $150.0 is 29%. The contract has already seen over $2 million in trading volume.

Also on Kalshi, the odds of a recession this year have dropped slightly, from 38% over the weekend to 32.6% now. Before the war, the odds of a recession were in the twenties.

Economy Already Under Strain

In an interview this morning with CNBC, Zandi said that the economy was showing signs of weakness even before the war.

He noted that the consumer had not been doing well in aggregate; vehicle sales were down, retail sales had been sideways for a long time, and that was before they were paying $4 for a gallon of regular unleaded.

February’s jobs report showed 92,000 positions lost, unemployment ticked to 4.4%, and Q4 2025 GDP was revised down to 0.7%.

Goldman Sachs raised its recession probability to 30% on Tuesday and now expects Brent to average $115 per barrel in April.

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