At the end of 2025, my forecast for the upcoming year was: “if you liked the U.S. economy this past year, there is a good chance you will like it in 2026.” There was little in the available economic data to suggest anything other than relatively modest growth in aggregate.
To be sure, as is always the case, some sectors had a better go of it than others. However, where the rubber meets the road, our analysis suggested there was little reason to expect the costs of either money or energy to experience significant directional change.
As a result, it was difficult to forecast either a spike or a collapse in economic activity. If history serves as a guide— while acknowledging historical patterns are not predictive— the U.S. economy doesn’t just turn on a dime or pivot dramatically without cause. It often takes something significant to knock things out of equilibrium.
Then, well…let’s just say March Madness took on a whole new meaning.
As we now know, the U.S. and Israel began coordinated military strikes against strategic positions in Iran on Feb. 28, 2026. Not surprisingly, the progression of the conflict dominated headlines for the remainder of the quarter. Also, perhaps even less surprisingly, crude oil prices climbed sharply, as the war significantly disrupted supply from the Persian Gulf region.1
According to Bloomberg, the “Generic 1st CL Future,”—a proxy for West Texas Intermediate (WTI) crude oil—rose from $67.02 per barrel at the end of February to $101.38 by the end of the first quarter Clearly, that is a large move in a critical commodity over a very short period.
While consumers may have felt some “pain at the pump” during March, it remains to be seen exactly what impact higher oil prices will have on longer-term economic activity. Intuitively, the longer crude prices remain elevated, the greater the potential drag on the economy—and not in a good way.
The inverse is also true: The shorter crude prices remain elevated, the more limited the impact on economic activity. Hopefully, that makes sense.
As a result, at the end of March, economic forecasts for the remainder of the year were—perhaps unsurprisingly—nebulous at best, hinging largely on the duration of the conflict in the Middle East. The sooner things stabilize, the sooner the U.S. economy can get back to relatively modest growth.
Put another way, it is my opinion that if we can exit Iran quickly, the economy could potentially get back to something closer to the conditions we saw in 2025. And, of course, if something changes in the tea leaves—or the crystal ball—we’ll be sure to let you know.
John Norris
Chief Economist and Chief Investment Officer
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