Raw materials, logistics chains, maritime routes… The outbreak of the conflict in the Middle East could be massive. Meeting in Italy, central bankers and economists shared their forecasts in the fog. And it’s not reassuring.
An icy wind has engumed Lake Como, wrindling the waters and throwing a cold on the economic forum organized, as every year, by the Italian think tank The European House Ambrosetti in Cernobbio, A kiss endowed with a remarkable sense of purpose, so much so the leaders present go there themselves with their cold shower on the world prospects. In the secrecy of discussions stifled by the thick carpets of the Villa d’Este, from former European Commissioner Mario Monti to the always governor of the Bank of France François Villeroy de Galhau, from the chief economist of the International Monetary Fund Pierre-Olivier Gourinchas to the former Swiss central banker and vice-president of the American BlackRock fund Philipp Hildebrand, all share a deaf concern:
« The risk associated with the war against the run is underestimated » (an influential investment banker). « We don’t know where all this will end up » (a high-ranking economist).
The words of Christine Lagarde, President of the European Central Bank (ECB), in the columns of The Economist also helped to freeze the atmosphere.
To think that a smooth return to normal is possible would be « to show too much optimism, » she explained. We are facing a real shock, probably beyond what we estimate at the moment »
However, the OECD (read box on page 25) already foresesees a serious slowing down, lowering its growth forecast for the euro zone by 0.4 percentage points compared to December, a weak rate of 0.8% in the end over 2026. According to INSEE, thanks to « growth acquis » it could still be 0.9% over the year in France. In addition to these policed projections, analysis firms are agitating more substantial risks.
Oxford Economics hypothesizes a long conflict, with oil hanging at $150 per barrel for four months. Result: a Europe in recession and a world that should be satisfied with 1.4% growth.
A dark scenario, but the complexity of the situation does not allow it to be ruled out. « We are immersed in a radical uncertainty, a non-modeling situation, » says Gabriel Felbermayr, head of the Austrian Institute of Statistics Wifo and president of the Kiel Institute. The changing and uncertain statements of American officials do not allow reliable projections to be established. Whether it’s Donald Trump pushing back his own ultimatums to the Iranian regime on a daily basis or his Secretary of State, Marco Rubio, assuring that American bombing will stop by mid-April, nothing in the public discourse can serve as a compass.
Risk of stagflation
In this fog, financial institutions, rating agencies, economic institutes and international organizations are strying to « detect the transmission channels that could spread the crisis, with very diverse consequences depending on the country, » explains Odile Renaud-Basso, president of the European Bank for Reconstruction and Development (EBRD) and former Treasury director in Berey.
The main risks are known.
First that of a stagflation, mixing rising prices, low growth and rising unemployment. The EBDB estimates that a barrel price permanently above $100 will lead to the destruction of 0.4 percentage points of global growth and inflation by more than 1.5 points. This pressure on prices is exacerbated by shortages of intermediate production, such as plastic and aluminum from the Gulf countries that no longer pass through the Strait of Hormuz (read p.28-29). In total, for POCDE, inflation in 2026 would rise by 0.7 points, to 2.6%. For France, INSEE predicts a peak in the spring of 2%. And Germany has already seen inflation at 2.7%
Loss of purchasing power
Faced with these figures, European central banks are bombing their chests: « There will be no price-salary spiral. Today, it is at the heart of our credibility to block such mechanisms, « says the economic manager of an issuing institute, recalling that the ECB has managed to tame the inflationary hydra triggered in 2022 by the war in Ukraine. Concrete translation: an interest rate hike by the ECB is in the pipeline and a loss of purchasing power in sight for households, because their incomes will not catch up with the price increase.
By focusing essentially on inflation, we must not overestimate our ability to avoid stagflation, however, tempers the chief economist of a large institution. Because this decrease in purchasing power that will follow may itself grip growth. «
Late markets
Another point of attention: financial markets. For now, they are experiencing a severe fall, but no crash. The S&P 500 fell by 7.5% in one month and the CAC 40 by 8.2%, « We must maintain maximum attention on global stock exchanges, rigorously observing the dynamics of American indices, private credit and the cryptoasset sector, » however, said François Villeroy de Galhau to the Italian daily La Stampa. The marketplaces did not understand what was happening, says an investment banker in Cernobbio. Because even if the war stopped tomorrow, the crisis will take place. There are so many points to monitor in very specific areas, such as the speed of recovery of facilities producing liquefied gas in Qatar, that the stock exchanges do not find themselves there. It may tang when you wake up. «
Decryption is indeed complicated by the instant globalization of the crisis. « The shock is certainly less important for Europe than the one due to the outbreak of the war in Ukraine in 2022, but it is truly global, with a much greater number of affected countries, » insists Beatrice Weder di Mau-ro, president of the Centre for Economic Policy Research. However, in an economy that remains globalized, what happens in one part of the planet does not stay there. «
The decline in transfers of funds from expatriates settled in the Emirates will thus have a hard impact on already weakened economies. « These transfers weigh 8% of Lebanon’s GDP and 5.5% for Egypt, » says Odile Renaud-Basso. The difficulty will be combined, for these two countries, with a decrease in tourism and a tension on the financing of public and private debts – Lebanon’s external debt reaching 335% of GDP.
Threat to technology
The grains of sand scattered from the Gulf by the breath of war are also numerous to be able to block production processes. The shortage of urea imported from the region to fertilize the soil has already led American farmers to plant less corn and more soybeans for their future harvest. Except that corn, unlike soy, makes it possible to produce ethanol, which is used in « clean » fuels. Enough to complicate the situation at service stations.
Even more serious: artificial intelligence, a powerful support for American growth and the rise of the Nasdaq in recent years, is exposed to multiple threats.
The countries of the Arabian Peninsula have so far formed solid support for American projects. For example, Qatar is a loyal investor in Anthropic, and Abu Dhabi participated in the creation of a $25 billion joint venture to finance electricity generation capacity for data centers and AI projects in the United States. However, with the recession that will hit the Gulf countries, such investments will be rare. « In addition, AI companies are heavily indebted and will face the tightening of credit conditions, » says Gabriel Felbermayr.
Resilience of companies
Finally, semiconductors essential to AI will suffer the consequences of global disorganization. Helium, which is part of the manufacturing process, comes from the region affected by the war (read p. 28-29).
Many Asian plants run thanks to energy from imported hydrocarbons. And maritime transport conditions in Asia are getting more tense every day, especially in Singapore, which is the largest supply port in the world but also produces 10% of the world’s chips and 20% of manufacturing equipment.
Some Asian ports mention the possibility of refueling only their national carriers, » adds Richard C. Koo, chief economist at the Nomura Research Institute. So many elements likely to suddenly burst the bubble from which companies such as OpenAl and Nvidia across the Atlantic have benefited from. And to trigger a stock market crash.
The only possible escape from these disaster scenarios seems to be due to the flexibility that companies will be able to show, by inventing new manufacturing processes, opening new logistics channels and sourcing from other sources. This is how they have already been able to cushion the tariff war triggered by Donald Trump a year ago. On the shores of Lake Como, the speakers intended to celebrate this resistance of the world economy in the face of Liberation Day on April 2, 2025. The same Donald Trump decided otherwise.
On March 26, the OECD was the first major 1 organization to update its forecasts according to the situation in the Middle East. The institution favors a central scenario that is not the worst, according to which the current disruptions in energy markets will ease over time, with oil, gas and fertilizer prices steadily falling from mid-2026. Exit, for the moment, stagflation, i.e. a morbid coexistence of inflation and the decline in activity:
– In the G20 countries, inflation is expected to be 1.2 percentage points higher than expected in 2026 and stand at 4%, before slowing down to 2.7% in 2027. • On the activity side, locomotives
American Chinese PRs resist but should slow down next year (from 2% to 1.7% for the United States and 4.4% to 4.3% for China).
Conversely, 2027 will be that of a small awakening of the euro zone (+1.2%) thanks to defense spending.
