US economy grows 2% in Q1 2026 amid Iran war clouds

The United States economy expanded at a 2 percent annual rate in the first quarter of 2026 despite emerging uncertainties linked to the ongoing war in Iran.

Official data released by the Commerce Department showed a rebound from the previous quarter's modest 0.5 percent growth.

Government spending and investment surged by 9.3 percent, contributing significantly to the overall growth.

Business investment also rose sharply by 8.7 percent, likely driven by increased spending on artificial intelligence technologies.

Consumer spending, which accounts for about 70 percent of US economic activity, slowed to 1.6 percent growth compared to 1.9 percent in the last quarter of 2025.

The housing market continued to weaken, with residential investment declining for the fifth consecutive quarter at an 8 percent annual rate.

Imports increased substantially, rising at an annual rate of 21.4 percent, which reduced the GDP growth by more than 2.6 percentage points.

This rise in imports reflects ongoing supply chain adjustments amid geopolitical tensions.

The conflict in Iran has created economic uncertainty, particularly through disruptions in energy markets.

Iran's blockade of the Strait of Hormuz, a critical passage for a fifth of the world's oil and liquefied natural gas, has driven energy prices higher, contributing to inflationary pressures.

The Federal Reserve has acknowledged the high level of uncertainty stemming from the conflict and recently decided to keep its benchmark interest rate unchanged.

Non-residential investment, excluding housing, saw a notable increase of 10.4 percent, marking the largest jump in nearly three years.

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