Financial Forecasts April 2026: It is not a victory if it does not put an end to the war (Montaigne, 16th)

The four- to five-week timetable announced initially has now expired, yet it is difficult to see an end in sight, let alone a return to the ex-ante situation.But Trump is looking for a way to bring the conflict to a swift resolution and for an excuse to claim victory. Whilst the fundamentalists have taken control of the entire Iranian state apparatus, Trump insists that he has brought about regime change (he has even claimed that “Iran wanted to make me their Supreme Leader but I refused…”). The nuclear programme could be another declared war aim that has been achieved, or oil, whilst free navigation in the Strait of Hormuz seems to be given less and less prominence and other's problem. In short, there are as many scenarios as Trump’s daily disposition upon waking up. Our current baseline scenario is based on the conflict lasting another month. The price of oil (Brent) is expected to average $118/bbl in April, $94/bbl in May and $85/bbl over 2026 as a whole. Gas prices are expected to average $62/MWh in April, $58/MWh in May, and $48/MWh over the year.In any case, the rise in the prices of oil, gas and raw materials (the region produces 10% of the world’s aluminium, fertilisers, sulphur, helium, plastics, etc.) amounts to a major stagflationary shock that will push up global inflation by nearly 1 percentage point and reduce global growth by half a percentage point. This is notably the shock we anticipate for the US economy, with growth expected to fall from 2.4% to 1.9%.Europe is not heavily reliant on the region for oil (10%) or LNG (3%), but it is feeling the impact of the global price effect, as two-thirds of its energy mix still relies on hydrocarbons (domestic production representing less than 1%). Only the most electrified countries will be least affected (gas prices currently influence electricity prices in Spain only 15% of the time and around 40% in France, compared with 70% in 2022 when the country’s power stations were out of action). We have therefore revised our 2026 GDP projections for Germany downwards by 0.5 percentage points, for Italy by 0.4 percentage points, and for France and Spain by 0.2 percentage points.We maintain our bullish bias on the EUR/USD. The Fed could still cut rates, as the slowdown will lead to a further deterioration of the US labour market (92,000 job losses in February, 15,000 monthly job creations in 2025 vs. 150,000 in previous years). The Fed could once again prioritise employment over inflation, and we have the arrival of Kevin Warsh in June. With the possibility of a cut by the ECB having clearly vanished, the question now is whether a hike could come at some point in time (“we are prepared to make changes to our policy at every meeting”, C. Lagarde), even if April is, in our view, off the table, pending greater clarity. A pre-emptive rate hike by the ECB is now likely in June, even if this appears to be primarily an energy supply shock (+50% in the case of Brent) against which the ECB is powerless and which seems unlikely to feed through to wages as it did in 2022, given that growth is slowing and unemployment is rising (to an expected 8.3% in France).Like the rest of Asia, China relies on the Strait of Hormuz for its energy imports, with 50% of its oil and 30% of its gas passing through this chokepoint. Nevertheless, China (1) has substantial strategic reserves (estimated at 1.9 billion bbl), (2) continues to import oil from Iran (of the 1.8 million bpd exported by Iran, 90% goes to China) and from Russia, and (3) is the country undergoing the fastest electrification (in 2025, China invested twice as much in renewable energy as Europe). We have revised our forecast for Chinese growth downwards, close to the lower limit set by Xi Jinping (4.5%-5%).Countries such as India, Japan, South Korea (70% of the oil imports of these last two countries pass through the Strait of Hormuz), Thailand, and the Philippines are much more severely affected.The US exit from Iran is imminent, but a return to normality will take longer. A risk premium will continue to be slapped on oil and gas, and on maritime transport, whilst supply bottlenecks – such as those affecting aluminium, helium (which is essential for semiconductors, 35% of which comes from Qatar), and plastics – will take weeks to ease. The inflationary shock will not be comparable to that of 2022 (it will be less severe and less prolonged), but its peak is undoubtedly still ahead of us.Looking ahead, how will a new military-theocratic regime in Iran respond to Israel, which may not back down even after Trump’s exit? Will the Gulf monarchies continue to outsource their security to the United States? What will become of NATO under Trump attacks in the face of a Russia that has emerged stronger? What of the US pivot to Asia, now that the USS Tripoli and the THAAD missiles have been withdrawn from South Korea, much to the delight of China and its allies? Will Cuba be the diversion wanted by Trump? The world seems less and less cooperative, more risky, belligerent and unpredictable than ever. Just like Trump eventually.