The US economy isn’t immune to the energy shock continuing to reverberate from the Middle East, but the fallout may be hard to spot in the upcoming second‑quarter GDP report. That, at least, is the message in current nowcasts.Output is projected to rise 2.5% in Q2, based on the median nowcast from a set of estimates compiled by CapitalSpectator.com. If correct, the Q2 report (scheduled for July 30) will mark a moderately stronger gain than the 1.6% increase in Q1.Recent Q2 nowcasts have been stable, holding in the 2%-plus range. Today’s 2.5% estimate is up slightly from the previous 2.4% nowcast on May 21.The concern is that deeper economic pain for the US has only been delayed rather than avoided. A prominent economic bear—Moody’s chief economist Mark Zandi—says the spike in oil prices has raised recession risk. Without a deal with Iran to reopen energy exports through the Strait of Hormuz, gas prices could soon top $5 a gallon, which he predicts would lead to lower consumer spending and an economic downturn. Writing on social media last week, he said:Consumers are running out of financial resources to maintain their spending, which stalled out last month. And then, of course, there is the surge in inflation, which is closing in on 4%, double the Federal Reserve’s target. And all of this comes after massive deficit‑financed tax cuts, which are now fading fast. The Iran war needs to end, and the Strait of Hormuz needs to be reopened soon, or recession will become more likely than not.HFI Research, an energy research firm, predicts: “By the end of June, if the Strait of Hormuz is still closed, global oil inventory operational minimum is guaranteed.”The latest news from the Gulf isn’t encouraging. The US and Iran have launched new strikes, raising fresh uncertainty about the prospects for peace talks.When and how the ongoing conflict and disruption to energy supplies will affect the US economy remains unclear. For now, at least, the effects on GDP nowcasts appear minimal. US growth is probably slower than it otherwise would have been absent the war, but recession risk remains low for the moment. The next move—up or down— in the nowcasts may depend on how long the energy bottleneck lasts.Original Post