U.S. Growth Looks Strong Unless Oil Shock Hits

AMG expects that annualized U.S. real GDP growth will likely remain around 2% during the second half of 2026 if certain variables play out.

Prospects for the economy largely depend on reopening navigation through the Strait of Hormuz, which has mostly been shut down since the war with Iran started Feb. 28, hindering oil supplies worldwide. AMG’s latest base case (most likely) economic forecast presumes that the strait will be largely open to traffic by sometime in September, and in any case the price for West Texas Intermediate crude oil will average between $70 and $90 per barrel.

In addition, the U.S. economy boasts several factors favorable for growth in real GDP:

• The labor market is solid, as the unemployment rate remains low, at 4.2%, and monthly job gains averaged 111,000 over the last three months, more than enough to maintain a low unemployment rate.
• Inflation is trending downward, though still above the Federal Reserve’s 2% target, and it does not appear that the central bank is in any hurry to boost interest rates.
• The growth impact of last year’s consumer- and investment-friendly federal tax legislation has yet to peak.
• Leading tech companies that are making large AI-related investments intend to continue an upward trajectory in capital spending, at least into 2027.

The United States is not alone in maintaining economic growth in 2026. Despite elevated oil prices and reduced global energy supplies, output has continued to rise. One reason is that pre-conflict oversupply built up petroleum inventories, allowing drawdowns to help offset the supply gap created by the strait’s closure. Those inventories are now much lower. A complete shutdown of shipping through the strait could deplete them in about three months, though some oil would likely move through alternate routes. Before inventories were exhausted, prices would likely rise enough to curb demand and encourage production outside the affected region. Under those conditions, crude oil prices could surge well above $100 per barrel.