Goldman Sachs lowers U.S. GDP forecast due to expected Brent crude oil prices of $98 in March and April

Investing.com - Goldman Sachs stated in a research report that due to the surge in oil prices caused by the war with Iran, the bank has lowered its GDP growth forecast for Q4 2026 by 0.3 percentage points to 2.2%.

The bank’s commodities strategist expects Brent crude oil to average $98 per barrel in March and April, up 40% from the 2025 average, then fall back to $71 in Q4 2026. In a scenario where oil flows through the Strait of Hormuz are interrupted for a month, the average price of Brent crude in March and April could reach $110, then decline to $76 in Q4 2026.

Goldman Sachs has raised its year-over-year overall PCE inflation forecast for December 2026 by 0.8 percentage points to 2.9%, and its core PCE forecast by 0.2 percentage points to 2.4%. The bank estimates that a sustained 10% increase in oil prices would raise overall and core PCE inflation by 0.2 and 0.04 percentage points respectively, while reducing GDP growth by about 0.1 percentage points.

The bank has increased its estimate of the recession risk over the next 12 months by 5 percentage points to 25%, citing inflation upside risks and weak February employment data. The recession probability is 10 percentage points higher than the unconditional long-term average but aligns with the latest Bloomberg consensus.

Goldman Sachs has delayed its forecast for the first Federal Reserve rate cut from June to September, with a second cut in December, bringing the terminal rate to 3%–3.25%. The bank states that if the labor market weakens earlier and more significantly than expected, concerns about rising oil prices and inflation will not prevent an earlier rate cut.

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