Iran’s control over the Strait of Hormuz is upending global energy markets. Prices remain under pressure, and geopolitical uncertainties are hindering a return to normalcy. Investors and governments must adapt to this new equilibrium, characterized by structurally higher costs and persistent tensions, according to economist Rémi Bourgeot.
Iran’s dominance over the Strait of Hormuz, coupled with the emergence of a new transit regime, is poised to have a lasting structural impact on global supply chains and price formation. This new reality is expected to have enduring effects on both markets and the real economy. There is little prospect of energy markets fully reverting to their pre-conflict state, even in the event of de-escalation.
The conflict has been marked by Donald Trump’s erratic shifts between negotiation overtures and escalation threats, with no viable strategy in sight, underscoring the pressing need for de-escalation. The current ceasefire is diplomatically unstable, with parties failing to agree even on essential aspects such as the halt of Israeli strikes on Lebanon or on the version of Iran’s proposed list of negotiating points. While the prospect of a genuine peace agreement remains distant, the U.S. withdrawal from the Iranian front is rooted in the necessity of extricating itself from a particularly damaging stalemate. It thus seems unlikely that the United States will seek to fully reopen this front.
Nevertheless, a U.S. disengagement without a concrete agreement paves the way for a new, ambiguous situation. The status of the Strait of Hormuz risks remaining undefined, based on the de facto control Iran exercises. It is therefore crucial to anticipate the dynamics that may prevail in energy markets amid this shifting landscape. Iran’s control over the Strait of Hormuz, coupled with the emergence of a new transit regime, is poised to exert a structural impact on global supply and price formation. This new reality is likely to have lasting effects on both markets and the real economy. There is little prospect of energy markets fully returning to their pre-war state, even in a de-escalation scenario.
I was interviewed by France 24 about the energy crisis and the challenges of reopening the Strait of Hormuz amid the military stalemate.English transcript below the video.
Rémi Bourgeot, you’ve been following this crisis very closely. Is this only the beginning?
It obviously depends on how the military situation evolves. Donald Trump has been sending mixed signals, and markets have been swinging wildly in response.
What we are seeing, in any case, is a military quagmire. Some geopolitical experts believe this is only the beginning. There are also signs of panic on the part of the U.S. administration, particularly from Donald Trump, who actually dislikes war. In fact, he prefers theatrical operations, like the one in Venezuela a few weeks ago. This, however, is a genuine quagmire.
So he is sending signals suggesting he would like to stop, while striking as hard as possible. The Iranians, for their part, largely dominate the situation, but they are also sending signals through these exchanges, notably with Oman, to at least establish some kind of framework that could apply to a partial reopening.
But what we are heading toward is Iranian control over the Strait of Hormuz. It could be reopened in part, even quite broadly, but likely under Iranian control, given that the United States is not capable of reaching its objectives—assuming there ever were tangible ones.
This Iranian control over the Strait of Hormuz, over time, implies a different system, a different economic regime, notably involving tolls, of which we have already seen certain outlines, partially implemented. That does not mean this will be the final configuration, but costs will be raised and this transit system will be put in place in a way that serves Iran’s geopolitical interests.
There have also been behind-the-scenes signals of exchanges between Iran and certain Gulf states—especially Qatar—to avoid strikes. But the situation is extremely tense, particularly with the United Arab Emirates, which has called on the United States to “finish the job,” to escalate, implicitly suggesting the deployment of ground troops. One could imagine Iran penalizing the United Arab Emirates more than other Gulf states.
And in any case, this reopening cannot be achieved by force, only through negotiations?
There is no real negotiation. There may have been emails or very indirect contacts, but there are very serious doubts about the reality of Donald Trump’s statements when it comes to negotiations.
That said, the notion of de-escalation cannot be ruled out. This is not what we are seeing these days, but Trump is extremely uncomfortable with the situation and understands that he needs to withdraw. His political position is collapsing. There are very serious doubts about his personal condition and about the political system surrounding him. He is dismissing generals around him in order to hear what he wants to hear, to avoid bad news.
What we are seeing is a genuine regime crisis developing in the United States, with much deeper roots. There is also an industrial side to this crisis, as the manufacturing base is unable to sustain what would be a long war.
On the question of ground troops, this is perhaps the most revealing signal: there has been no such announcement. There has been no announcement either of an end to the war or of a withdrawal. Yet sending ground troops would mark the entry into a long war, with even more severe uncertainties—something that would be almost suicidal on Donald Trump’s part.
Today, we are in an in-between situation, with a desire to get out of this quagmire, but Trump wants to be able to claim some form of victory and avoid humiliation. That humiliation is there in any case.
To return to the very concrete consequences of this political and military deadlock, there has been much discussion in recent weeks about measures taken by countries to ration fuel, cut taxes, and provide subsidies. France, for the time being, is refusing to do any of this. Is that relevant?
When it comes to acting on prices, taxes are often short-term measures. They can have positive effects. But the real situation we are facing is a form of shortage that is now emerging. This is about very concrete, material realities: ships that were supposed to arrive are not arriving. A shortage is taking hold, already very severe in Asia.
It is worth recalling that Europe is much less dependent on the Gulf for its energy supply than many Asian countries. The various sources of supply—Norway, North Africa, the United States for LNG, and partly the Gulf—show that this dependence exists but remains limited. Some countries have larger reserves; this is the case for China, which also has greater autonomy, while still being largely dependent on the Gulf.
The reality is therefore material: a shortage is taking shape. It is less pronounced in Europe, but it is already being felt. This is happening in the context of an economic crisis, particularly an industrial one, that was already acute before the start of this war. The issue of energy prices was already critical, with the effects of the war in Ukraine: loss of supply, attempts to reorient away from Russia, but at the cost of creating new dependencies—on the United States or on certain Gulf countries.
We are thus seeing a form of hyper-globalization of energy networks that is now proving extremely vulnerable.
On top of the crisis you’re describing, there is also inflation—the general rise in prices, including food prices to come. Should people in France prepare for this?
Yes, it has a strong inflationary effect. We are not in the same situation as with the war in Ukraine, which came after the pandemic and very expansionary fiscal policies. We are not seeing the same kind of surge, but inflation is clearly rising.
Above all, inflation is a composite index: behind it lies everyday life, constrained spending that affects certain activities and certain social groups more than others. That is what is particularly problematic, both socially and in terms of political instability.
Energy markets are unlikely to fully return to prewar standards once a deescalation process starts. The conflict has introduced lasting costs. In particular, Iran’s role in the Strait of Hormuz has become structural to global supply risk and pricing, as a new transit regime can be expected to apply. This new normal should have a lasting effect on financial markets and the real economy.
This piece is published in partnership with the French Institute for International and Strategic Affairs (IRIS).
Donald Trump’s statements about the terms of negotiations with Iran have astonished many as they did not seem grounded in real diplomatic channels. Meanwhile, his threats of massive escalation and ground offensives hardly pointed to a realistic strategy, given the enormous political and economic cost, as even the European governments most aligned with the U.S. started to distance themselves. Although confusing, this agitation finally reveals the urgency to find an exit from the quagmire. In practice, deescalation can occur even without full negotiations. It is important to understand what dynamics will be at play in energy markets in light of this trend.
Tehran has been exerting control over shipping through Hormuz during the conflict, by dramatically restricting or threatening access but also applying charges on commercial ships for transit. Sustained control over the strait would translate into direct economic influence and pricing effects on global energy markets. This can take the form of negotiated transit fees, enhanced monitoring requirements, and arrangements that reflect Tehran’s geopolitical interests.
Such explicit or implicit arrangements would sustain a structural premium on energy prices. Transit fees could act like reparations, providing revenue to rebuild infrastructure and support the regime, while structurally sustaining a premium on global energy prices. Simultaneously, some sanctions have been effectively relaxed in the sense that Iranian crude continues to flow through the Strait of Hormuz, reflecting U.S. reluctance to further tighten supply and worsen global price shocks.
Market Price Dynamics and Short‑Term Reactions
A cessation of hostilities would reduce active risk to tankers allowed passage by Tehran and reassure insurers, lowering the current premium embedded in energy prices. It would quickly see at least a partial reversal of the price spikes, which translated into an overall 60 percent surge. Global equity indices rose and energy futures already fell on various reports of deescalation prospects.
However, a deescalation process alone does not guarantee an immediate restoration of normal flows or of confidence in the security of transit routes. Reconstruction of damaged infrastructure, clarification of maritime security arrangements, and the re‑establishment of reliable insurance coverage are all prerequisites to a fully functioning transport environment. These processes take time and some degree of international coordination. Risk premia and cost structures in energy markets can therefore be expected to persist above prewar levels.
The overall disruption to oil markets is unprecedented and price behavior cannot be read solely through short‑term trading patterns, in one way or another. Oil and gas futures curves frequently reflect this complexity. For example, short‑term contracts have exhibited backwardation — where near‑term prices are higher than further delivery dates, indicating that markets expect supply constraints to ease over time even if the near‑term remains tight. However, persistent risk premiums and structural changes in supply can maintain a higher baseline.
A Lasting Economic Impact
Meanwhile, prolonged increases in energy prices feed through into inflation. Energy‑related price pressure will persist beyond short‑run market repricing. Persistent inflationary pressure complicates macroeconomic trends, reinforcing second‑round effects such as wage demands and broader price adjustments beyond energy components. In turn, higher inflation expectations and elevated energy costs feed directly into bond yields on government debt, affecting sustainability.
For energy importers, the implications extend beyond immediate price levels. Disruptions affect contract structures, investment decisions in alternative supply lines and household cost burdens. Europe, while less directly reliant on Gulf than Asia for crude oil and LNG, faces its own challenges in terms of supply and pricing dynamics. With the relegation of nuclear energy production Europe’s strategy has tended to become a process of shifting from one external dependency to another as crises erupt.
Deescalation reduces acute risk, but structural factors such as Iran’s control over the Strait of Hormuz and the time needed to rebuild confidence and infrastructure mean the market may settle at a new normal contrasting with prewar levels. The interplay between security, infrastructure, inflation dynamics and fiscal stress will shape financial and macroeconomic conditions in ways that a simple cessation of hostilities does not entirely resolve.
This piece only serves analytical purposes and does not constitute investment advice.
Donald Trump is looking for an off-ramp from the Iran war quagmire. While threatening major escalation that would make parts of the region uninhabitable, he claims that negotiations are taking place.Although real peace negotiations are now out of reach, given the unbridgeable gap in demands, a deescalation is possible.
Countries dependent on energy imports from the Gulf however brace for long term consequences even if the conflict halts. Production capacity is now damaged and Iran is likely to retain a high level of control over the strait.
Europe is less exposed to the supply crisis than Asia but the energy price surge severely aggravates its multiple crises, from manufacturing to debt management. The relegation of nuclear energy leaves the continent particularly exposed to this succession of geopolitical crises, with governments constantly shifting from one external dependency to the next as shocks erupt.
I took part in Al Jazeera’s Counting the Cost. Extracts of my interventions are available here.
I answered questions from journalist Nils Adler on gold’s steadiness despite the Iran quagmire. In addition to quotes on Al Jazeera’s website, here is my broader analysis.
A geo-economic shock such as the disruption of the Strait of Hormuz would traditionally be seen as driving gold demand higher. However, structural factors have tempered its safe-haven appeal.
Flight to Liquidity, Volatility, and Market Psychology
During major crises, financial markets often experience broad stress, with assets across the board under pressure as investors seek liquidity and safety, particularly in the U.S. dollar and Treasuries. Even gold, historically a safe haven, can remain flat or decline when markets favor cash or liquid assets. This pattern has been evident as the Iran war escalated. Gold has stayed relatively stable rather than rallying sharply, despite extreme tensions. Paradoxically, it is the potentially systemic nature of this crisis that limits demand for gold, as other financial mechanisms play out.
In addition, the Federal Reserve’s stance remains decisive. Rising energy costs and persistent inflation reinforce expectations that interest rates may stay elevated, strengthening the dollar and making interest-bearing assets more attractive than non-yielding gold. This interaction suppresses bullion’s immediate appeal, showing how monetary policy interacts with geopolitical and structural financial risks.
Also, the gold market is increasingly shaped by speculative trading and heightened volatility, which can spook risk-averse investors. Rapid swings and profit-taking discourage accumulation, undermining gold’s role as a safe-haven asset. Pre-existing multi-year highs amplify this effect, preventing a full-scale flight into bullion. Speculative volatility can defeat gold’s short-term function.
Meanwhile, apart from bouts of systemic financial risks which can trigger flights to dollar liquidity, the geo-economic landscape will remain shaped by massive fragmentation, which support diversification efforts, including into gold over the longer term.
Protracted Stalemate, Escalation Risk, and Energy Shocks
The U.S. is faced with a strategic fiasco, as Donald Trump did not anticipate Iran’s response on gulf states and the strait of Hormuz. While he threatens to keep going up the escalation ladder, even his closest allies refuse to participate in high-risk, potentially suicidal, missions to escort tankers in the strait. The economic and political consequences pressure him to look for an escape strategy,
However, even in case of deescalation, cessation of hostilities and reopening of the strait, a long-term negotiated peace between US/Israel and Iran is now out of reach for the foreseeable future. The central scenario is a protracted stalemate, which prolongs regional instability and durably threatens the Gulf’s export reliability. The conflict cannot be seen as a mere short-term and limited event. It will have significant consequences on the global economy and the block logic.
Sanctions and Financial Fragmentation
The expanding scope of sanctions and the increasing use of trade policy as a tool of geopolitical coercion have contributed to a fragmentation of the global financial system, encouraging state institutions, banks, and multinational corporations to explore alternatives to dollar‑based mechanisms. Where once the dollar served as a relatively uncontested anchor for international trade and reserve holdings, the growing risk of exclusion from dollar clearing and finance has led policymakers in several regions to reassess their reliance on U.S.‑centric systems. The war in Ukraine illustrated how quickly the reliance on traditional financial instruments can shift. The outbreak of hostilities and the flow of sanctions coincided with a sharp rise in the price of gold, as investors and central banks sought perceived safe havens.
More recently, escalating trade tensions and competitive tariff strategies have prompted renewed diversification, whether through other currencies, gold and other commodities, or the development of regional payment systems. These dynamics suggest a broader reassessment of long‑standing assumptions about dollar dominance and raise questions about how economic policies will evolve in an era of intensifying geopolitical rivalry.
The Essence of Gold
Gold’s trajectory depends on the consequences of the Iran conflict, central bank responses, and the structural fragility of global finance. The muted price response to the Iran war confirms that gold does not always skyrocket during crises. Its enduring value lies in being a real, physical store of wealth, reflecting interactions among liquidity, sanctions, dollar dominance, interest rates, speculative volatility, and strategic uncertainty, rather than acting solely as a short-term panic hedge. Even under strong sanctions and geopolitical risk, gold’s primary role is preservation of wealth, not reactive price spikes.
This piece is published for analytical purposes and does not constitute investment advice.
This piece is published in partnership with the French Institute for International and Strategic Affairs (IRIS).
The U.S. administration criticizes the European Union for failings that often have real basis. However, the EU’s economic subordination to the United States and the embrace of its cultural crisis play a key role in Europe’s falling behind. In light of this paradox, these attacks are all the more destabilizing since the Trump administration’s economic demands – acquiesced to by Ursula von der Leyen – simultaneously hinder any possibility of Europe re-entering the technology race. Beyond transatlantic invective, this historical impasse makes the prospect of the EU’s breakup tangible. We must anticipate its potential effects through productive and intellectual resilience.
The trade terms dictated by Washington first illustrate the technological impasse amid the transatlantic chaos. In exchange for unilateral tariffs of only 15%, the von der Leyen Commission has implemented a policy of accommodation towards the U.S. tech sector on most issues, with the exception of those related to social media content. The fact that these concessions are subsequently presented as a competitiveness policy unfortunately does not mitigate their long-term effects.
The abandonment of technological autonomy follows a series of ill-conceived strategic choices. More than the lack of discussion, these bets have revealed a gap in scientific and industrial competencies. Examples include: the excessive gamble on hydrogen, the generalized transition to electric vehicles without competitive impact studies, later forcing a retreat, the semiconductor failure (with the costly reliance on technology transfers from Intel, now losing momentum). One could add the export of Germany’s energy transition shock, amplified by the abandonment over the past decade of gas import diversification projects, in favor of Nord Stream I & II. Concrete skills have been supplanted by bureaucracy, high-level events, and regulatory prose.
We have imitated the excesses of U.S. governance, but omitted the scale of its research system, funding for technological programs, and the emergence of Big Tech within this framework. The aspect that inspires Europeans is more centered on the type of managerial hypertrophy that led to the decline of a company like Boeing.
The crisis in European industry illustrates the exhaustion of a logic of extreme logistical optimization, at the expense of innovation and new industries. This has allowed us to benefit from very low costs in Asia and Central Europe while capitalizing on the prestige of legacy brands. The energy crisis and China’s technological leap – long presented as a promised land for European exports – have derailed this model.
The fact that the United States seeks to anchor its reindustrialisation effort in the subordination of its vassals adds to these difficulties. Shortages of military equipment on the Ukrainian front have not only revealed the extent of industrial attrition in the EU and the US, behind the enthusiasm generated by the AI bubble at the same time. They have also accelerated the fracture within the Western bloc, leading Europeans to start redeveloping their military capabilities. However, this period of political turmoil seems ill-suited to long-term strategic planning and to averting nuclear risk, which motivated previous generations. Moreover, remilitarisation is largely benefiting US defence companies as evidenced by high-profile orders of F-35s.
In reality, the level of deindustrialisation calls into question our very interpretation of GDP, given the activities that are now at the heart of developed economies, sustained by bubbles until they burst. At a time when many countries are developing, training engineers in large numbers, and deploying them for industrial expansion, we must soberly assess the value of our deindustrialised economies in the era of PowerPoint and circular funding.
The euro crisis did not lead to genuine reconsideration. On the contrary, it was followed by a policy of monetary bubbles and, around 2017, the belief in an imminent leap forward for federal structures. A reindustrialization dynamic was even announced, although a more cautious analysis could only indicate the opposite trend. It is in this context that France’s situation has continually deteriorated on the financial and industrial front. The maxim that each crisis is an opportunity to complete a stage in the EU’s edification has accompanied the fading prospect of a stable, creative, and prosperous society.
A fresh start for the European Union is hindered by the very nature of its falling behind, rooted in deep cultural trends, of which the bureaucratic drift and the educational crisis are central elements. Instead of remedies, we see numerous parties and movements of all kinds positioning themselves in a cultural war, the terms and theatrics of which are directly imported from the U.S. The Commission’s current concessions would, in a best-case scenario, delay a productive recovery by several years.
Beyond Donald Trump’s invective, the long-term persistence of the EU can no longer be the sole working hypothesis in the face of looming financial shocks, productive and educational decline, and the outcome of the Russo-Ukrainian war. States and economic stakeholders must prepare for the possibility of a disruption in the European system within a decade.
The focus, at this stage, should not be on making prophecies about the triggering factor, among various options: from the election of the Alternative für Deutschland (AfD) to the exit of certain Central European countries, potentially losing their status as net beneficiaries of the EU budget due to Ukraine’s integration – which might explain why Moscow does not oppose it.
Rather, the task at hand is to undertake preparatory work to avoid a disorderly breakup. Such an event would have dire consequences for countries that, at that moment, would lack both a productive base and necessary resources. In a scenario combining breakup and lack of preparation, the trend illustrated by the EU-Mercosur agreement could, by that time, even lead to food supply difficulties. A resilience strategy must address these tangible risks.
Anticipating the possible return of responsibilities to the national level, within a framework closer to an integrated customs union and a monetary coordination mechanism, could provide some impetus towards a productive strategy and an educational revival. As the level of mutual ignorance among Europeans has reached an alarming level, such an effort could even bring us together around more concrete objectives of good relations and stability.
Donald Trump said after a summit in South Korea with his Chinese counterpart Xi Jinping that he had agreed to reduce tariffs on Chinese products to 47% in exchange for Beijing guaranteeing a supply of rare earths and buying American soybeans
“I was on France Info TV yesterday discussing how, behind the threat of chaos, Trump is successfully pushing a new paradigm of unilateral tariff protection. While these tariffs are relatively modest, they come with a long list of demands aimed at deepening his partners’ dependencies in digital, military, and energy sectors. Meanwhile, Europe is sacrificing its technological future to prop up its legacy industries.
