U.S. Q1 Growth Hits 2% as Iran Risks Mount

The U.S. economy grew at a 2% annualized rate in the first quarter of 2025, according to official data covering January through March. The number lands below the pace seen in recent quarters and signals a modest slowdown even before the sharpest trade and geopolitical pressures fully hit. The backdrop is complicated. Tensions with Iran are casting a shadow over the near-term outlook, with the risk of conflict potentially pushing oil prices higher and unsettling financial markets. A sustained spike in energy costs would squeeze household budgets and raise input costs for businesses across manufacturing, transport, and logistics. Consumer spending, which drives roughly two-thirds of the U.S. economy, remains a key variable to watch. If confidence softens in response to geopolitical uncertainty or higher fuel prices, growth in the second quarter could slow further. Analysts are watching whether the Iran situation escalates or resolves, since that single factor could shift the energy price outlook significantly. The Federal Reserve's rate path and any new trade policy moves add further layers of uncertainty heading into the rest of 2025.