Upstream, therefore, in the Middle East, a diplomatic window has opened (or perhaps it would be more accurate to say it has been left ajar). The memorandum of understanding recently signed between the US and Iran has fuelled hopes of a détente in the Strait of Hormuz, or even the immediate and complete reopening of this strategic waterway. Our scenario aims to be ‘realistic’ – and therefore cautious – just as players in the maritime sector, shipowners and insurers will be, and rules out a rapid ‘return to normal’. The resumption of maritime traffic will be only gradual; oil infrastructure in the Gulf will ramp up production gradually, with the exception of a few heavily damaged complexes. Given the low level of oil stocks, this only partial easing of tensions justifies oil prices remaining high during H226, before falling in 2027, while remaining above their pre-war levels. For global gas markets, even an incomplete reopening of the Strait of Hormuz is also welcome, given that European natural gas stocks are currently lower than those seen during the 2022 energy crisis.

In short, even assuming a lull in which energy prices fall but remain high, causing an inflationary shock with limited impact, the costs in terms of growth are, unsurprisingly, very uneven: due to energy prices, but not solely so.

The US economy has thus weathered the shock caused by the war in Iran well. The us is now a net energy exporter and is set to benefit from a positive correlation between oil prices and growth in non-residential fixed investment. While household finances remain extremely sound and investment spending on AI continues to point to another strong year for non-residential investment, fiscal policy is providing support, with the entry into force of the ”One Big Beautiful Bill”, notably through tax rebates. Although wage growth has moderated, the labour market remains resilient and the pace of job creation is expected to remain high enough to keep the unemployment rate around its current level of 4.3%. Inflation appears to have peaked, and second-round effects, particularly evident in core inflation, are expected to remain contained. Inflation is therefore expected to stand at around 3.5% by the end of 2026, then 2.5% by the end of 2027. As for core inflation, which is expected to hover around 2.9% at the turn of 2026-27, it is also forecast to end 2027 at around 2.5%. Pockets of vulnerability remain but appear to be confined to low-income households and small businesses; they are unlikely to spread to the wider economy. The 2.1% growth forecast for 2026 would therefore match that of 2025, before experiencing a slight slowdown in 2027, while maintaining a sustained pace (1.9%).

In the euro area, the inflationary spell is undermining growth prospects to a greater extent than those of its closest competitors. Factors contributing to a loss of competitiveness are mounting. Weak net external demand is eroding growth, while domestic drivers are faltering, even before the negative impact of the war in the Persian Gulf has had a chance to take effect and without taking exceptional factors into account. Overall, in Q1, a slowdown in household consumption, a decline in investment, a contraction in exports after the boost provided by the anticipation of US tariffs and resilient imports – despite subdued domestic demand – combined to result in weak growth (0.3% QoQ, excluding Ireland). Indicators suggest that the economic downturn is slowing, consistent with a stabilisation of GDP in Q2. Despite weak QoQ growth until the end of the year, the high level of growth carry-over gives grounds for hope of a growth rate (excluding Ireland) of 0.8% in 2026. The euro area would thus avoid a recession, thanks to relatively robust fundamentals and a temporary inflationary shock. Headline and core inflation rates are expected to approach 3.0% and 2.5% respectively by end-2026, before both converging towards 2.2% by end-2027, a year in which, due to a normalisation without any significant rebound, growth is not expected to exceed 0.9%. 

The scenario therefore assumes a substantial inflationary shock, but one that stays contained, as second-round effects would be very limited and inflation expectations would remain anchored. Against a backdrop of high uncertainty, central banks should nevertheless remain vigilant to ensure that core inflation does not spiral out of control. The Fed is expected to remain on hold throughout 2026, ending the year with the upper bound of the Fed funds rate range at 3.75%. As inflation slows more markedly, it would make a final cut in Q227, resulting in a terminal rate of 3.50%. However, there is now a clear upside risk to this baseline status quo scenario, with a non-negligible possibility that the next move will in fact be a rate hike. As for the ECB, having raised its interest rates by 25bp on 11 June (deposit rate to 2.25%), its flexible approach – with no commitment to a predetermined path of rate hikes – reflects the high level of uncertainty surrounding the outlook for both inflation and growth. The ECB could raise its rates twice more this year. However, the tightening could be limited to a single hike, bringing the deposit rate to 2.50 per cent, should energy prices ease significantly. 

Inflation, which is evident but also anticipated by the markets, has already led to a significant rise in interest rates. Our ‘imperfect normalisation’ scenario assumes that energy prices do not hinder a decline in inflation followed by monetary easing (albeit in the distant future). In this context, interest rates (swaps) could begin to trend cautiously lower. A little patience will therefore be required. In the US, following a significant rise in the term premium and once the peak forecast for this summer has passed, 10Y US Treasury yields are expected to approach 4.55% by year-end. In the euro area, the German 10Y Bund yield is expected to rise, peaking at 3.20% in December 2026, which would prevent French and Italian yields from rising significantly above 4.00%.

Finally, on the foreign exchange front, hopes of a de-escalation of hostilities in the Persian Gulf have helped to boost risk appetite. Assuming a lull – however precarious – in the Middle East, fundamentals should once again drive currency movements. However, a comparison of economic performance between the US and ‘old Europe’ does not favour the EUR, which is expected to depreciate, with EUR/USD falling to around 1.13 by end-2026.