The probability of a U.S. government shutdown has dropped to 42%, according to estimates from NS3.AI, reflecting a notable shift in Washington’s fiscal outlook.

Both Democratic and Republican leaders are increasingly factoring in the economic, political, and reputational costs associated with a shutdown. Previous shutdown episodes have disrupted federal services, delayed government payments, weakened consumer confidence, and triggered short-term market volatility—outcomes lawmakers are keen to avoid, particularly in a sensitive economic and electoral environment.

The likelihood of a U.S. government shutdown has significantly decreased to 42%, according to NS3.AI.

The declining shutdown risk helps reduce near-term macro uncertainty, especially for sectors heavily exposed to government spending, including defense, infrastructure, healthcare, and public services. For financial markets, the easing probability may support risk sentiment, stabilize Treasury markets, and reduce demand for defensive positioning tied to political gridlock.

However, while the immediate threat has softened, negotiations remain fragile. Budget disagreements and funding deadlines continue to pose headline risk, meaning investors are likely to stay cautious until a durable funding agreement is secured.

Overall, the reduced likelihood of a shutdown offers short-term relief, but markets will remain attentive to developments in Congress as fiscal talks progress.