Middle East Conflict Triggers 'New Oil Shock,' Slows French Economic Growth in 2026

The ongoing conflict between the United States, Israel, and Iran in the Middle East has caused a significant 'new oil shock,' leading to a sharp rise in energy prices and pressuring the French economy throughout early 2026. French Economy Minister Roland Lescure warned on March 24, 2026, that this crisis could have systemic economic effects, overturning earlier expectations of only a temporary disruption. The blockade of the Strait of Hormuz and damage to energy infrastructure in the region have removed 15-20% of global oil supplies and about 20% of liquefied natural gas from the market, cutting roughly 11 million barrels per day globally. Brent crude prices surged to over $104 per barrel, up 60% from $63 at the end of 2025, while gas prices increased by 70% in the past month.

As a result, France faces a slowdown in economic growth to approximately 0.2% for both the first and second quarters of 2026, a downgrade from previous forecasts, with total growth by mid-2026 expected at 0.9%, matching growth from the entirety of 2025. Inflation, currently at 0.9% in February, is projected to rise to around 2% by June 2026, with the Eurozone inflation possibly exceeding 3%. Households are already experiencing reduced purchasing power, causing a notable slowdown in consumer spending. Private sector activity contracted at its fastest pace since October 2025.

Despite these challenges, Lescure emphasized that France’s reliance on nuclear energy provides some cushioning compared to other nations, though public anger over rising fuel costs remains high. The government has ruled out cutting fuel taxes to address the crisis, highlighting that the oil shock negatively impacts public finances. A committee is scheduled to meet on April 21, 2026, to further assess the fiscal effects.

Key industrial sectors like aeronautics and defense continue to support growth, but the full economic impact is expected to deepen in the second half of 2026 if the conflict continues. Lescure underscored the uncertainty about the conflict’s duration and its unpredictable economic repercussions, signaling a tough year ahead for the French economy amid global energy volatility.