UCLA Anderson Forecast: Oil shock replaces tariffs as leading risk to U.S. economy

The June 2026 UCLA Anderson Forecast for the U.S. and California finds the economy confronting another inflationary shock, this time driven by the war in Iran and the closing of the Strait of Hormuz. After tariff-driven inflation appeared to peak and the labor market began to stabilize, rising energy prices have created a new source of pressure on households, businesses and the Federal Reserve.

The national economy remains relatively resilient, but the Iran-related oil shock has replaced tariffs as the major inflation threat. GDP growth is now expected to hold at roughly 2.1% in 2026 rather than accelerate; inflation is forecast to peak at 4.5%; and unemployment is expected to rise only modestly to 4.5%. The key forces offsetting the oil shock and tariffs are investment in artificial intelligence, tax cuts and earlier fiscal support.

In California, the same energy shock creates additional pressures because of the state's specific low-emissions gasoline requirements and the importance of ports and logistics to the state economy. California continues to outpace the U.S. in output and income growth, but its labor market remains weak, and the employment recession described in prior Forecast reports is expected to continue through the third quarter of 2026.

Read the full UCLA Anderson Forecast news release.