🕐 Updated: 2026-05-03 17:00 CST | Mixed economic data, growing uncertainty for H2.

The latest data from the US Commerce Department shows that US GDP grew 2% in the first quarter of 2026, marking a recovery from the impact of the prolonged federal government shutdown. However, soaring energy prices and global supply chain disruptions triggered by the Iran war cast significant uncertainty over the economic outlook for the second half of the year.

Recovery from the Shutdown

Early this year, the US federal government experienced one of the longest shutdowns in history. President Trump eventually signed a bill funding the Department of Homeland Security, ending the unprecedented government closure. During the shutdown, a large number of federal employees were forced to work without pay, government services were widely disrupted, and economic activity suffered significant drag.

The 2% growth rate in Q1 indicates that the economy is rebounding from the shutdown’s trough as government operations resume. Consumer spending and business investment showed signs of recovery in March, and the labor market remained relatively stable.

The Iran War’s Economic Shadow

Despite the Q1 recovery signals, analysts are broadly cautious about the second half of the year. The impact of the Iran war on the global economy is accelerating:

• Persistently high energy prices: Middle East tensions are keeping crude oil and natural gas prices elevated, directly driving up transportation and production costs
• Fertilizer shortages threatening agriculture: Global fertilizer supplier Yara warned that fertilizer shortages caused by the Iran conflict could reduce crop yields and push food prices higher
• Aviation industry under pressure: Surging fuel costs have already led to the bankruptcy of low-cost carriers like Spirit Airlines, and the UK government is even considering allowing airlines to preemptively cancel flights due to fuel shortages
• Ongoing supply chain disruption: Shipping risks in the Strait of Hormuz are exacerbating global trade uncertainty

The Federal Reserve’s Policy Dilemma

The Bank of England’s latest report detailed the impact of the Iran war on household finances across multiple dimensions, including mortgages, employment, and energy bills. Facing the dual challenges of inflationary pressure and slowing economic growth, central banks are facing difficult balancing acts in monetary policy.

The Federal Reserve needs to assess whether the surge in energy prices is a temporary shock or a structural change, which will determine its next interest rate moves. Markets broadly expect that if energy prices remain elevated, the scope for rate cuts will be significantly compressed.

Consumer Confidence

BBC analysis points out that voters will judge the Trump administration based on economic conditions in upcoming elections. While the 2% Q1 GDP growth is a positive signal, ordinary citizens’ personal experience of rising prices may have more political impact than macroeconomic data.

Cost of living remains the top concern for American households. Rising food, energy, and housing costs are eroding the real gains from wage growth, with low- and middle-income families feeling the pressure most acutely.

Outlook

Overall, the US economy is at a critical crossroads. On one hand, the Q1 data recovering from the government shutdown sends a positive signal. On the other hand, geopolitical risks and energy shocks from the Iran war may impose greater headwinds on economic growth in the second half of the year.

Economists generally agree that if the Middle East situation cannot be de-escalated in the short term, US economic growth could slow significantly in H2, with some even warning of a technical recession risk.

Source: AP News、BBC News