JPMorgan Chase has officially killed off its "Goldilocks" economic scenario for 2026-27, warning that the Iran conflict has pushed the U.S. toward a negative growth shock that could send unemployment climbing.

The "Goldilocks economy"—that rare sweet spot where inflation cools while growth continues—is no longer in JPMorgan's forecast deck. Instead, chief economist Bruce Kasman's team is modeling stagflationary pressures: sticky inflation around 3% combined with deteriorating growth prospects.

For readers who aren't econ nerds, here's what Goldilocks means: an economy that's neither too hot (inflationary) nor too cold (recessionary), but just right. We had a shot at that earlier this year. The Iran war ended it.

The catalyst is straightforward: oil. Gas prices hit $4.56 per gallon last week—the highest in four years—as the conflict disrupted flows through the Strait of Hormuz. That's not just a problem for drivers. Higher energy costs cascade through the entire economy, raising transportation expenses, input costs for manufacturers, and prices for virtually everything consumers buy.

JPMorgan trimmed global growth forecasts by approximately 0.25 percentage points and warned that "risks are elevated that an energy price shock squeezes household purchasing power and depresses business sentiment, raising the specter of a negative growth shock raising unemployment rates."

Let me translate that from banker-speak: Oil prices are going to hit consumers so hard that they'll stop spending, businesses will panic, and people will lose their jobs.

The bank expects core goods inflation to exceed 2% as elevated fuel costs work their way through supply chains. Core inflation overall—the metric the Federal Reserve actually cares about—is forecast to remain stuck around 3%, well above the Fed's 2% target.

Here's the particularly ugly part: JPMorgan sees no path to lower inflation without weaker demand. Translation: We need economic pain—slower growth, higher unemployment—to bring prices down. The soft landing everyone hoped for isn't happening.

Oil markets are pricing in sustained disruption. Even if diplomatic efforts produce a reopening within a month, as some reports suggest, the damage to consumer confidence and business investment is already done. Expectations matter in economics, and right now expectations are deteriorating rapidly.