Global recession fears were rising as the war in Iran enters its fourth week. Oil prices spiked over the weekend on Donald Trump’s ultimatum to Iran to reopen the Strait of Hormuz , but they fell back down this morning when the U.S. President said he had held “very good and productive” conversations with Iran over ending the war.

Whether talks this week resolve the conflict remains to be seen, but pessimism about its economic damage has been growing. 

The latest global risk survey by Oxford Economics, which spanned from the start of the conflict into its second week, found that the share of businesses who said their outlook on global growth was more negative doubled to about three-quarters.

Risk of a global recession rose to a one in six chance, well above the reading prior to the outbreak of war, said Oxford.

The U.S. economy is increasingly viewed as a potential casualty of the war, according to the survey. Before the conflict started, three quarters of respondents believed that U.S. exceptionalism would continue. Oxford said that figure has fallen significantly with just over half of businesses expecting the United States to lead growth this year.

Moody’s Analytics chief economist Mark Zandi warned last week that a U.S. recession would be “difficult to avoid” if oil prices remain elevated “for much longer (weeks and not months).”

Even before the conflict broke out, Moody’s economic indicator model put the odds of a recession in the next 12 months at 49 per cent, he said.

“It isn’t a stretch to expect the indicator to cross the key 50 per cent threshold amid the Iranian conflict and the resulting surge in oil prices,” Zandi wrote in an X post.

— Mark Zandi (@Markzandi) March 16, 2026 Every recession since the Second World War, apart from the pandemic, has been preceded by a spike in oil prices, he said.

While high energy prices don’t do as much damage to the economy now as they did in years past, “consumers still get hit hard and fast, and they were already increasingly nervous spenders,” he wrote.

Average responses in the Oxford survey now point to global growth slowing to 2.2 per cent in 2026, a 0.2 percentage point downgrade since the outbreak of war.

This week we will get a first look at the economic damage when purchasing manager indices for March come out Tuesday. Economists predict the data to show a global weakening across both manufacturing and services, said Bloomberg.

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Canadians kept spending in the first two months of the year, data showed Friday, but March could be a very different story.

Retail sales rose 1.1 per cent in January and are estimated to have gained 0.9 per cent in February.

But in yet another example how the Iran war is disrupting the economy, retail sales are expected to dip in coming months as consumers, facing higher energy prices, cut other spending.

“New headwinds – from higher prices at the pump to financial market volatility – risk weighing on demand through both higher costs and a potential reversal of wealth effects,” said Maria Solovieva, economist at Toronto Dominion Bank.

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