JPMorgan economists are warning that the U.S. and global economy may be moving away from the best-case “Goldilocks” scenario investors had hoped for in 2026. That scenario — where inflation cools while growth remains strong — now looks increasingly unlikely. The bank says the Iran war and the related surge in oil prices are likely to create a negative growth shock, while keeping inflation higher than policymakers and markets expected.
The main problem is energy. Higher oil prices raise transportation costs, business input costs, and gasoline prices for households. JPMorgan economists said those pressures could push global core inflation above the bank’s earlier forecast of about 3% and lift core goods inflation above 2%, which is also the Federal Reserve’s long-running inflation target. In other words, even if some headline inflation cools later, the deeper inflation problem may remain sticky because energy affects so many parts of the economy.
JPMorgan also trimmed its global growth forecast by about a quarter of a percentage point. That may sound small, but the warning is broader: if energy costs stay high, they can squeeze household purchasing power, damage business confidence, slow hiring, and eventually push unemployment higher. The bank’s economists said a meaningful decline in inflation may only happen after a “material growth disappointment,” meaning prices may cool only because the economy weakens.
The warning comes as inflation has already accelerated. Consumer prices rose at a 3.8% annual pace in April, the fastest rate in three years, while U.S. gas prices reached $4.56 per gallon, the highest level in four years. Those numbers matter politically and economically because gasoline is one of the most visible prices for consumers. When fuel rises sharply, Americans often cut back on restaurants, travel, shopping, and other discretionary spending.
JPMorgan also pointed to other inflation risks beyond oil. Supply chains appear less resilient than in previous years, and global trade tensions could make disruptions more expensive. Wage inflation is another concern because wages rose sharply after the pandemic and have only partly eased. With unemployment still below pre-pandemic levels in many countries, JPMorgan said a strong growth environment may not be enough to bring wage pressure back to levels consistent with 2% inflation.
Inflation expectations are also rising. The Cleveland Fed’s measure of expected one-year inflation one year from now rose to 3.53% in May, up sharply since March. That matters because expectations can become self-reinforcing: if workers and businesses expect higher inflation, they may demand higher wages or raise prices, making inflation harder for central banks to control.
Overall, JPMorgan’s message is that markets should stop assuming an easy landing. The economy may still avoid a severe recession, but the combination of war-driven oil prices, sticky wages, fragile supply chains, and rising inflation expectations makes the path much more difficult. Instead of steady growth with falling inflation, the U.S. may face a more painful tradeoff: weaker growth first, lower inflation later.
