Goldman Sachs interprets 'How long will the Iran war last': Markets have priced in 'inflation'—but not yet 'recession'.

In response to the crisis, the U.S. government has deployed multiple policy tools: coordinating the release of 172 million barrels from the Strategic Petroleum Reserve (SPR)—averaging roughly 1.4 million barrels per day—granting waivers on sanctions against Russian and Venezuelan oil, and suspending the Jones Act for 60 days. Yet Alec Phillips, Goldman Sachs’ U.S. Chief Political Economist, points out that U.S. SPR inventories have already fallen below 60% of capacity; under current plans, they will plummet to just 33% by mid-year, severely limiting further release capacity. While an outright ban on crude exports is deemed 'highly likely', it remains outside Goldman’s baseline scenario for now. Markets have priced in 'inflation'—but not yet 'recession' The macroeconomic toll of this energy shock is becoming increasingly evident. Joseph Briggs, Senior Global Economist at Goldman Sachs, offers a key empirical rule: a 10% rise in oil prices reduces global GDP by over 0.1% and lifts headline global inflation by 0.2 percentage points (with Asia and Europe bearing disproportionately heavier impacts); core inflation rises by 0.03–0.06 percentage points. Applying this rule, the three-week supply disruption so far has already shaved approximately 0.3% off global GDP; if it extends to 60 days, global GDP would fall by 0.9%, while global prices would surge by 1.7%. Compounding this, the Global Financial Conditions Index (FCI) has already tightened sharply by 51 basis points since hostilities began—signaling rapidly escalating risks of economic slowdown. However, Kamakshya Trivedi, Goldman Sachs’ Chief FX and Emerging Markets Strategist, identifies the most critical vulnerability in today’s global market pricing structure: markets have completely failed to price in 'downside growth risk.' Trivedi observes that global assets have thus far treated this conflict solely as an 'inflation shock.' This manifests in two ways: (1) interest-rate markets undergoing hawkish repricing (front-end yields surging across G10 and emerging markets—especially in the UK and Hungary, where prior rate-cut expectations had been strongest); and (2) FX markets diverging strictly along the Terms-of-Trade (ToT) axis (the U.S. dollar strengthening, while currencies of energy exporters—Norway, Canada, Brazil—outperform, and those of energy importers across Europe and Asia weaken). This pricing logic rests on an extremely dangerous implicit assumption—that the war will be brief (a downward-sloping oil and gas futures term structure corroborates this view). Trivedi warns that once this blind optimism proves false—and energy prices prove persistent—markets will be forced into sharp downward revisions to global growth and corporate earnings forecasts. At that point, 'growth downside' will be the second shoe dropping. Under this recession-trade logic: 1. Equity markets across both developed and emerging economies—so far relatively resilient—will face massive selling pressure; 2. Pro-cyclical assets such as copper and the Australian dollar will suffer severe selloffs; 3. The hawkish front-end yield repricing will reverse; 4. The Japanese yen (JPY), rather than the U.S. dollar, will emerge as the ultimate safe-haven currency amid simultaneous equity and bond market sell-offs. The Middle East and North Africa (MENA) region has already begun feeling the economic winter. Farouk Soussa, Goldman Sachs’ MENA Economist, estimates that Gulf Cooperation Council (GCC) countries are losing roughly $700 million per day in oil revenue; a two-month disruption would cost them nearly $80 billion.

U.S.-Iran War: A Global Reshuffle?

Two weeks into the conflict, the overall battlefield situation remains multi-dimensional and stalemated—summarizable as an asymmetric dynamic: 'U.S.-Israeli aerial dominance versus Iranian missile retaliation + economic warfare.' First, according to reports, with overwhelming superiority in air and naval power, the U.S.-Israeli coalition has secured air superiority over Iranian airspace and destroyed Iran’s naval main force (the U.S. claims sinking 58 warships). Iran’s air and naval forces are effectively paralyzed; the coalition even achieved the rapid elimination of Iran’s top leadership. Iran’s countermeasures focus on 'asymmetric retaliation': deploying missiles and drones to strike U.S. military bases across the Middle East, launching attacks on neighboring countries (e.g., the UAE and Kuwait), and blockading the Strait of Hormuz while targeting oil tankers. Given that the Strait handles roughly 20% of global energy shipments, its closure triggered a sharp short-term spike in oil prices—striking directly at former President Trump’s political Achilles’ heel: rising oil prices would exacerbate U.S. inflation, thereby undermining all his strategic calculations. In short, while the U.S. and Israel hold decisive advantages in combat capability and intelligence, Iran’s use of missiles and Strait blockade has dragged the war toward a 'protracted war of attrition.' 03 Analysis of Possible Future Scenarios Frankly, 'Fish Head'—a Chinese analyst—has no definitive view on how this war will end, given the current lack of overlap between the two sides’ stated demands. Iran insists on U.S.-Israeli reparations, formal apologies, and security guarantees—a demand inconceivable for Trump, whose pride is globally renowned. Meanwhile, U.S. messaging shifts daily: one day demanding Iran’s unconditional surrender, the next calling for a swift conclusion... All that can be said is that both sides have incentives to negotiate—but their current positions remain unrealistic. Prolonged bargaining seems inevitable, as each side seeks to accumulate more leverage. Three primary scenarios lie ahead—their probabilities hinge on Trump’s self-imposed 'time red line' and Iran’s endurance. Scenario One: Short-Term Resolution (50% probability) This is Fish Head’s most likely outcome. The current fighting clearly exceeds Trump’s original expectations for the war’s scope and duration. Further delay risks fueling inflation, which would severely damage Republican electoral prospects—a concern underscored by Trump’s repeated references to the war concluding in 'four to six weeks' or 'very soon.' Still, two major uncertainties remain: first, whether Iran is willing to accept terms that allow Trump to save face—given his well-known obsession with prestige; second, Israel’s stance. Recent Israeli behavior suggests extreme hawkishness; Israel is deeply aligned with the U.S. in the Middle East—if the U.S. refuses to fight, Israel may go it alone—and Iran will not back down. Scenario Two: Protracted War of Attrition (35% probability) Current market intelligence indicates that Iran’s new Supreme Leader, Mojtaba Khamenei, is a hardliner. Iran may adopt a 'survival equals victory' strategy—continuing to stall and maintain the Strait of Hormuz blockade, using Republican electoral concerns as leverage to pressure Trump into concessions. While this approach would increase pressure on the U.S., it would also inflict heavy costs on Iran itself: the longer the war drags on, the worse Iran’s economy and inflation become—exacerbating public discontent already high under the current regime. Scenario Three: Escalation and Loss of Control (15% probability) This is the worst-case scenario: either Iran or Israel launches significantly more aggressive attacks.

Reckitt CEO expects delayed inflation impact from Iran war

Jun 16, 2026

Reckitt CEO warns of delayed inflationary pressure from the Iran crisis driven by high oil prices and supply disruptions, citing potential margin declines despite emerging market growth.

reuters

2026-06-16

Reckitt CEO expects delayed inflation impact from Iran war

2026-10-27

Reckitt lowers annual revenue growth guidance on struggles in North America

Reckitt CEO expects delayed inflation impact from Iran war

FAQ