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U.S. economy grew at 1.5% in Q2 2026 amid Iran conflict

Published July 31, 2026 at 12:05 PM UTC

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The U.S. economy expanded at an annualized rate of 1.5% in the second quarter of 2026, slightly below economists' expectations of 1.8%. This growth occurred amid geopolitical tension due to the Middle East conflict and a surge in energy prices. Despite these challenges, consumer spending and AI-driven business investments remained key drivers. Consumer spending—a major component of GDP—accelerated to a 3.2% annualized pace, up from 0.5% in the previous quarter. Federal Reserve Chairman Kevin Warsh highlighted the economy's resilience and strong business investment, particularly in AI. Additionally, inflation, measured by the Fed's preferred gauge, eased in June as energy prices stabilized temporarily during a pause in the Middle East conflict.