Traders are increasingly pricing in the possibility of a recession this year, and some think it could happen sooner rather than later.
Kalshi’s 2026 recession market jumped to nearly 31% over the weekend, an increase of 9.1 points, before falling back to 28% on Tuesday.
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The price of oil
Rising oil prices are likely driving the shift in recession expectations. The Wall Street Journal reported on Sunday that the price of oil topped $100 a barrel for the first time since 2022. U.S. crude futures also rose 13% “after skyrocketing last week at their fastest pace since the futures began trading in 1983.”
The flow of oil has slowed in the Persian Gulf. The Journal also reported that Iraq’s oil production fell “to less than one-third of its levels” before turmoil began in the region. Kuwait also started cutting its oil production “because it is running out of storage space.”
“Nightmare scenario”
Some economists warn a recession could be near if oil supplies continue tightening.
Author and S&P Global vice chair Daniel Yergin warned in a Financial Times op-ed that the economy could be in a “nightmare scenario” due to the Persian Gulf. He also said there’s a “fear” that “this will result in skyrocketing energy prices that send the world economy plummeting into a deep recession.”
When will it happen?
As for when a recession will begin, traders are pricing in the chance of one starting in the first quarter of this year at just 13%.
The takeaway
Kalshi markets now predict
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