Wall Street analysts indicate that the risk of a U.S. economic recession is increasing as ongoing Middle East conflicts continue to drive oil price volatility. Gregory Daco, chief economist at EY-Parthenon, stated earlier this week in a report that downside risks have risen significantly. Daco noted that under current conditions, the probability of a recession is now set at 40%, but emphasized that this figure could quickly rise if the Middle East conflict persists or escalates further. The economist highlighted that disruptions in the Strait of Hormuz and heightened risks to oil production suggest that inflationary pressures will be more persistent than just a temporary spike in energy prices. If the conflict intensifies, pushing oil prices above $100 per barrel and driving up other key commodity prices while tightening financial conditions, U.S. inflation could approach 5%, and real GDP growth could slow by more than 1 percentage point, significantly increasing recession risks. Recent consumer price index data showed an annualized inflation rate of 2.4%, while core inflation, which excludes volatile energy and food categories, rose 2.5% year-over-year. On Wednesday, oil prices fell by more than 3% as markets continued to monitor developments related to Iran. U.S. President Donald Trump hinted that the United States is engaged in negotiations with Iran. WTI crude dropped to around $88 per barrel, while Brent crude fell below $96. Since the escalation of tensions between the U.S., Israel, and Iran, oil prices have risen approximately 25%. Daco also pointed to vulnerabilities in AI-driven investments and the private credit sector, noting that liquidity pressures could evolve into solvency challenges. Earlier this week, Goldman Sachs economists also raised their 12-month probability of a U.S. recession from 25% to 30%, citing rising oil prices and their impact on the global economy. Goldman Sachs chief economist Jan Hatzius stated that the bank's upward revision of oil and gas prices would push global inflation up by about 1 percentage point and reduce global GDP growth by 0.4 percentage points. Hatzius wrote that although the direct impact of energy prices on U.S. growth may be relatively small, it coincides with tightening financial conditions and fading fiscal stimulus in the second half of the year. As a result, the bank now expects below-trend economic growth, rising unemployment, and has slightly increased the 12-month recession probability to 30%. He anticipates that the Federal Reserve will cut interest rates in September and December but has delayed expectations for Bank of England rate cuts until 2027, while predicting that the European Central Bank will raise rates in April and June. Meanwhile, on the Polymarket prediction platform, traders' bets on the probability of a U.S. recession by the end of 2026 have increased from 23% on February 27, before the Iran conflict escalated, to 35% as of Wednesday.