Financial Forecasts March 2026: Epic Fury Road

No one knows how long the conflict in Iran will last and as such, it is currently impossible to confidently factor the conflict and its impact into our forecasts. The United States and Israel are seeking to destroy military infrastructure and bring about a rapid regime change, while the Iranian regime has only one objective: to hold out over time.The magnitude of the shock will obviously come primarily from oil and gas prices, even though Iran produces only 1.5% of global oil supply (12% of reserves).For now, upward risk premia are logically being priced into oil, gas and certain safe-haven assets such as gold, and downward premia into equities and, perhaps more surprisingly, into bond prices. The US dollar direction was questioned but is clearly a buy for now against major currencies (BTC is a sell again). The question is whether these premia are justified in size ($15–20/bbl on oil, €25–30/MWh on TTF, the strongest since the Russian attack in 2022, even though at €58 we are far from the €320 at that time) and whether they will persist over time.It seems unlikely that Israel and the US will lose the battle; the question is how the war will end. Either the regime falls and Iran, with its 90 million inhabitants, shifts into a new paradigm more favourable to investment (Iran holds nearly 12% of oil reserves, is rich in metals, tourism used to be flourishing, a cable car links Tehran to Tochal and the ski resorts...), and the market moves back to “risk-on”. Or there is a transition similar to Delcy Rodríguez in Venezuela, where not much really changes, oil production resumes, Ras Laffan (20% of global LNG) reopens in Qatar and the market returns to previous levels. Or the conflict drags on and the Strait of Hormuz (20% of global oil, 20 million barrels, 20% of LNG) remains blocked, preventing OPEC’s spare capacity from substituting for the 1.4mn b/d exported by Iran and from transporting gas, and stagflationary threats increase. In this extreme scenario, our oil analyst Joel Hancock expects a barrel potentially around $100/bbl, even if the IEA and China release strategic oil stockpiles, versus $66/bbl in the central scenario, which clearly sees the risk premium fading by year‑end. Of course, there are no strategic gas reserves, so the implications for European and Asian gas prices in the upside risk scenario are even more extreme.The most significant impact is expected for the largest importers dependent on the Strait: over 80% of traffic concerns Asia, with China (12% of its oil comes from Iran, 20% of Qatari gas is destined for it) and India at the forefront. It should be noted, however, that the conflict would need to last for quite some time to put China in real difficulty, as it probably has reserves close to 1,200 million barrels, i.e. around 10 days of global consumption. Europe is only marginally affected at first order (3% of Hormuz traffic; only 12% of the oil imported by France comes from the Middle East, 0.7% of its gas comes from Qatar) but is impacted through exposure to energy prices. This is particularly true for gas: although the end of winter is mild, the spring restocking period is approaching with storage levels at only 30%. US LNG and Norwegian pipeline suppliers are rubbing their hands. So is Vladimir.The US is only marginally affected, importing just 17% of its energy needs (a 40‑year low). However, the impact on prices is substantial there as well and potentially costly in electoral terms. With crude at $100/bbl, US inflation would be close to 4%. This explains the repricing of Fed cuts and the rise in the dollar if this scenario were to materialise, which we consider unlikely.For now, the market is pricing in an inflationary shock (a $10/bbl increase in the oil price generally translates in the models into an additional 0.4 percentage point of inflation, depending on the economy). Rate cuts have been repriced and the term premium has risen. At this stage, however, we are not changing our Fed (cuts in June and September) and ECB (prolonged status quo) scenarios, and we believe that the moves in the front end of the curve are excessive.It seems difficult to envisage a risk‑off scenario with rates rising sustainably. One should note in this sell‑off the underperformance of Europe (and a further widening of the OAT‑BTP spread to more than 7 bp, whereas Italy was trading 7 bp through France six weeks ago). If the situation were to persist, stagflation would become more likely, and higher‑for‑longer rates would probably weigh on risky assets, particularly credit (both private and public).We are therefore adjusting our oil and gas, growth and inflation forecasts only at the margin for now. Central banks generally look through short‑term commodity price tensions. Uncertainties, however, are numerous, and market moves can be self fulfilling: nothing changes sentiment like prices...