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    • Category: Energy

    • Conflicts: Are Economic Sanctions Effective?

      Conflicts: Are Economic Sanctions Effective?

      I took part in Radio France Internationale’s Today’s Debate, hosted by Romain Auzouy. Below is a transcription of my contribution to the discussion.

      RFI: Rémi Bourgeot, this “Economic D-Day,” in Donald Trump’s words, so this new U.S. strategy toward Iran, which obviously concerns Tehran first and foremost, but also, in order to target Iran more effectively, all countries that would maintain relations with Iran: do you think this could ultimately have more of an impact on the regime in Tehran than the American bombs?

      Rémi Bourgeot: That is how Donald Trump presents it to the rest of the people shaping opinion in Washington, and particularly to neoconservative circles. He needs to tell them that he is continuing this drive to crush Iran. Since it has been a huge failure militarily, he claims he is going to continue the war on the economic front. Then, when you look more closely, there is a huge gap between these stated objectives, which are to economically suffocate Iran, and the reality of what the United States can actually do in terms of additional sanctions.

      We are talking about secondary sanctions, about threatening Iran’s economic and commercial partners so that they stop trading with Iran as much as possible. So one very important country in this equation is China, which is Iran’s main partner when it comes to hydrocarbon imports, and also when it comes to supplying Iran with all kinds of components, particularly for industrial and military purposes.

      For China, it is clear that there is no question of enforcing these secondary sanctions. It has instructed its companies, particularly its banks, not to be intimidated and not to implement these sanctions. In a way, it has already been through this with the trade war, by rejecting certain American threats and threatening to restrict rare-earth exports last year. So on that basis, it is responding very differently than it did a few years ago to the question of enforcing sanctions, and it is rejecting them.

      And on that basis, we are seeing a number of countries that are fairly close to Iran commercially following the same path. Even Pakistan has said it will not enforce these sanctions, these threats of secondary sanctions. So that gives you an idea of just how limited the impact actually is. Turkey is in NATO, at the same time it has relations with Iran, but it has absolutely no desire to follow the United States down this road. People say Iraq would be the case, but that also shows how limited the effect is, in a way.

      Then, I don’t think it is unreasonable, from Donald Trump’s personal point of view, to go and tell those neoconservative circles I was referring to: “I’m carrying on.” We can see that he is stuck. There is a kind of regime crisis unfolding in Washington. He knows he is in the middle of a fiasco, that going to war with Iran was a huge mistake. He has no military way out, and this can partly be a way of escaping this situation, this military dead end, by pursuing the war more on the economic front.

      But beyond that, I don’t think he is particularly interested in the actual effect, which is limited. Obviously, we should remember that Iran is already under very substantial sanctions and is economically strangled in any case. But this idea of targeting all the relationships, all the trade that Iran currently has, particularly with China, remains a very distant prospect.

      It is perhaps more of a political act, then, something the United States knows well: the U.S. has been sanctioning Iran virtually since 1979. Doesn’t China’s attitude already show the ineffectiveness of sanctions, which you were talking about? For example, China buys 90% of Iranian oil. So, once China is able to ensure that these sanctions don’t affect it, particularly in Beijing’s case — this is the whole issue with secondary sanctions, which cut off access to the dollar, the essential channel for international transactions — but China uses the yuan through its own financial system that it has built. Does all of this mean that, whatever form they take, sanctions cannot bring about the kind of economic strangulation the United States claims they can?

      You have the situation linked to the Strait of Hormuz, where exports are nevertheless limited. You have the American counter-blockade, so there is still some traffic taking place, but it remains very limited. Then we can see an architecture adapting to these American threats, and above all to their erratic nature. So you have this architecture becoming more firmly established in terms of payment systems.

      But then there are also issues of trust and dependence that remain very significant when it comes to the dollar. But if we take a broader view, we still have this enormous bloc centered around China, with Russia as well, which is a crucial factor when it comes to sanctions.

      Now, with the Iranian front, we have a huge bloc that has come together. It is not completely unified. Obviously, each country is defending its own interests, but they interact, they trade, they provide one another with essential things, and above all, they now have formidable industrial capacity. That is what is lacking on the Western side, with this crisis in industrial production, and that is what is on the minds of all decision-makers, particularly Donald Trump.

      There is the political message, as you said. It is interesting to bring up China’s attitude toward Russia. China is much more discreet in the Russian conflict than it is when it comes to Iran. Would you say that, ultimately, perhaps we have never had so many states using — or at least, perhaps, economic sanctions have rarely been used so extensively — to threaten states, to distance them, and never to pursue what Michel Duclos was saying? Ultimately, perhaps sanctions have never been circumvented to this extent, as in China’s case, which may be at the very heart of this issue, because China is the country countering the sanctions weapon today?

      The idea of sanctions really became significant during what we call the unipolar moment, after the collapse of the Soviet Union, with this overwhelming power of the United States, and with this idea of economic warfare, of shaping the world through interventions in some cases, but also through all kinds of economic measures, particularly sanctions, economic warfare. And since then, a lot has happened.

      We have seen the emergence of certain countries, major industrial and technological powers like China, and even countries such as Iran and Russia have also developed their own industrial and technological momentum. They train a higher proportion of engineers than Western countries. That is the direction they are moving in today, and we are seeing a kind of convergence, in fact, taking place.

      We see it particularly in terms of military production capacity, where there is a huge problem on the Western side in the various wars being fought in Ukraine or against Iran, or on all sorts of issues. On the other side, we have more of a crisis of overproduction centered on China, and a whole group of countries that are part of this industrial and technological development dynamic, that train huge numbers of engineers and still know how to make use of them.

      And so sanctions are, in a way, somewhat anachronistic when it comes to these countries. Sanctions were designed at a time when these countries were much less developed, much less resilient. Since then, they have not only developed considerably in industrial and educational terms, but obviously they have also learned how to circumvent sanctions in all sorts of ways.

      For example, Russia, at the beginning of the Ukrainian affair, around 2010–2014, was still at a different stage of development. It was much less interested in industrial issues. The sanctions actually pushed it to make an effort in that direction and really set this dynamic in motion.

      So obviously, sanctions do have an effect, but they also encourage countries to be inventive, to find ways around them, through different financial means and different channels, but also by going much further in terms of educational and industrial development.

      We said that it obviously impoverishes people. The first group affected by these economic sanctions is the population; they become poorer. Can this turn populations against the regime in question? Could that also be the objective of sanctions?

      That is the objective. But in Iran’s case, for example, we can see that the threat is existential. Trump has not hidden that. At the beginning, we were talking about Iranian women football players and I don’t know what, and a few weeks later Trump was talking about annihilating Iranian civilization. So we were no longer really in what you might call a humanitarian discourse.

      So in Iran, what we have seen instead is a rallying effect. That is often what happens in the case of massive bombardments, when a nation faces an existential threat.

      And today, there has indeed been a change of regime, not in the sense of the neoconservative theories, but the regime has effectively changed, and today we have more of a military dictatorship, with these figures coming from the Islamic Revolutionary Guard Corps, these veterans of the Iran-Iraq War, who are much less religiously conservative, who have also relaxed the enforcement of religious rules considerably, particularly when it comes to wearing the veil. We see many women who are not veiled in Iran’s major cities, particularly in Tehran.

      So what we have seen is more of a form of partial unification, obviously, but a form of rallying by the population in the face of the existential threat posed by the United States and Israel. That is more on the military attack side.

      Then sanctions do play a role, of course, but without this whole context over the past twenty years, one could imagine that an emerging middle class, much more visible in Iran, with precisely these ideals of political change, might have led the regime to adapt much more, or even to genuinely change.

      This whole highly antagonistic context with the United States has probably tended instead to keep the regime in place.

      The regime in place, yes, because one could also have imagined that, in this desire to impoverish the population, there was this idea that, effectively, sanctions make that situation even worse.

    • Economic War against Iran: Rhetoric and Deadlock

      Economic War against Iran: Rhetoric and Deadlock

      Interview on France 24 in French – Read the full English transcript below the video.

      Rémi Bourgeot is with us live to discuss the US sanctions against Iran. Hello, and thank you for joining France 24. You are an associate researcher at IRIS. “It will work,” says Scott Bennett. “It worked in Venezuela after the blockade. It worked in Cuba, and it will work in Iran.” Is it really that simple? Can weakening Iran’s economy actually weaken the Iranian regime?

      Iran’s economy is indeed severely weakened, but there is a massive gap between the US announcements and the claim of waging a total economic war. The main obstacle to this aspiration is China, Iran’s most important trading partner. China is both a major importer of Iranian oil and a supplier of essential components to Iran.

      Yet China refuses to comply with these sanctions. Given the current state of Sino-US relations—and China’s previous pushback against US threats, even commercial ones—Washington cannot afford to take an offensive stance against China with so-called secondary sanctions.

      So there is a real disconnect between the announcements, the intended effect, and reality: the measures remain limited. Nevertheless, taken together, they are already very significant and exert enormous pressure on Iran’s economy, particularly through the US-imposed blockade.

      If I understand correctly, Rémi Bourgeot, these are just empty threats? They won’t actually be enforced?

      There is a sense of desperation on the US side. Donald Trump knows the military war is lost. It’s a strategic disaster: the US has lost much of its effective presence in the Middle East.

      The idea is to announce strong measures to reassure neoconservatives in the US that the offensive continues, while at the same time trying to disengage militarily.

      In terms of actual sanctions, Iran’s trading partners refuse to enforce them. This was not the case a few years ago, when US sanctions threats—particularly against banks in these countries—created real panic, and the sanctions were effectively followed.

      Today, in China, the government prohibits banks from reacting and thus from enforcing these sanctions.

      Other key players include Turkey, which cannot afford to follow US orders as it has no interest in doing so. The United Arab Emirates, for their part, were more aggressive a few months ago, urging the US to “finish the job,” but they have also sought to find a modus vivendi with Tehran.

      Overall, the US lacks the means to impose massive secondary sanctions on Iran’s trading partners. This means that China, Russia, or Turkey, if they do not comply with these sanctions, will not face US retaliation.

      These countries are in very different positions relative to the US. China, for example, has been in a standoff with the US for two years now: it rejects some US sanctions and prohibits companies—especially banks—from complying with them. We saw this during the trade war, when China threatened to restrict rare earth exports in response to US tariff threats.

      This standoff has now extended to geopolitical sanctions targeting other countries. China is building on this momentum and banning the enforcement of sanctions on its soil.

      The measures remain limited to networks directly linked to Iranian trade. But the idea of blanket sanctions—targeting anyone with even the slightest financial connection to Iran—is unacceptable to China. Moreover, Beijing has the means to reject and retaliate if the US pushes in that direction.

      Other countries take a different approach. Turkey, a NATO member, is close to the US but also pursues its own interests and has no intention of blindly following US orders. That is not its agenda.

      As for Russia, already under sanctions, it maintains a special relationship with Iran, particularly in military terms.

      One last question, Rémi Bourgeot: Who currently controls the Strait of Hormuz?

      The Iranians effectively control it, but the US adds its own additional blockade. Traffic is currently very low, especially toward Asia, but the situation is not completely blocked.

      Washington went all-in with this summer’s offensive, but it was another resounding failure. Even economically weakened, Iran retains military and industrial capabilities—particularly through its ballistic missile and drone programs—which prevent the US from resolving the conflict militarily.

      Today, we see a shift in US rhetoric toward economic pressure. But after two years of trade war, the US’s actual leverage is very limited.

      This is a way for Donald Trump to send signals to neoconservatives as he tries, step by step, to extricate himself from this desperate situation.

      Thank you very much, Rémi Bourgeot, for joining us today.

    • France Might Become Europe’s Data Center Hub, but Where Does It Stand in the AI Race?

      France Might Become Europe’s Data Center Hub, but Where Does It Stand in the AI Race?

      Interview with Atlantico on France’s AI Infrastructure investments, following the 2026 Choose France Summit announcements (Excerpts).

      Are the Choose France announcements a sign that France is winning the AI race—or just the data center race? Behind the €93 billion figure, how much actually goes toward developing AI technologies, models, and intellectual property compared to infrastructure?

      These investments do not mark a decisive victory for France in the AI race, but they do position the country at the heart of Europe’s AI infrastructure. While they bring industrial benefits, the creation of intellectual property largely remains in the hands of international players. The challenge now is to leverage this attractiveness to develop a national AI industry.

      Amid an energy crisis, France—with its largely decarbonized electricity and stable grid—has become a European hub for AI infrastructure, drawing in players like SoftBank, Brookfield, and Ardian. These firms are investing in data centers and sparking industrial partnerships. Schneider Electric, for instance, is mobilizing its expertise in energy efficiency, cooling, and automation. These projects help develop high-performance data center management skills.

      However, the development of key technologies and models remains limited. Despite initiatives like the Bull/Foxconn project on motherboards, the focus is more on infrastructure than R&D labs or GPU production—the latter being where much of the sector’s real value lies. Europe still lags far behind in semiconductors, despite some promising efforts.

      We must also consider the financial exuberance surrounding AI, particularly in infrastructure financing. A national strategy cannot be built on speculative promises alone. As seen in global initiatives, France should develop local funding sources and protect the integrity of its tech companies, both in terms of intellectual property and capital resilience.

      We often distinguish between inference data centers (which execute queries) and training data centers (where large AI models are developed). Is France hosting the most strategic parts of the value chain, or mainly data centers that benefit from our energy advantage?

      Overall, the projects cover both types, though the distinction isn’t always clearly defined. The Ardian/Verne “AI Gigafactory”—combining high-performance computing and research activities—appears to be the most training-focused. Training centers are more strategically valuable from a geopolitical and industrial standpoint, as they require massive resources (energy, cooling, GPUs) and are difficult to relocate.

      Inference data centers, on the other hand, are less strategic since they rely on pre-trained models and optimized chips. Yet they complement France’s offering by enabling large-scale AI service deployment with reduced latency for European users. Their value lies in proximity to end markets.

      The key challenge is avoiding the role of a mere host. France must capitalize on these infrastructures to develop technological partnerships, attract R&D centers (by conditioning support on technology transfer commitments), build ties with local industry (for sector-specific models), and ensure it doesn’t remain just a provider of electricity and land.

      Arthur Mensch, Mistral AI’s CEO, told the National Assembly that AI is first and foremost a heavy energy industry. Does France truly understand that the AI battle won’t be won on talent or software alone, but on the ability to produce and deliver electricity? Can France meet the electrification challenge posed by AI’s demands?

      Mensch rightly reminded policymakers that AI isn’t just about models—it’s about physical and energy infrastructure. Behind every model lie data centers, semiconductors, cooling systems, and power grids. Beyond leveraging France’s tradition of mathematical creativity and its versatile engineers and researchers, the country must also exploit its abundant, stable, and competitive electricity supply. Here, nuclear power remains a key advantage, even if the sector has been weakened by strategic indecision and hindered by a flawed European pricing framework.

      Why does France face a two-year window of opportunity in AI? Are we witnessing an industrial revolution where today’s decisions will shape global power dynamics for decades?

      We’re entering a phase of consolidation. The early years of generative AI were experimental—models were developed, pricing was fluid. Now, the players controlling compute, data, talent, and energy are locking in their positions. The parallel with industrial revolutions is clear: those who dominate foundational infrastructure set the technological, financial, and geopolitical standards that follow.

      Yet we must resist the dominant narrative. We’re in an era of excessive valuations, with circular financing mechanisms between semiconductor companies, hyperscalers, and model providers. Many use cases remain unproven, while markets anticipate massive future revenues—even as some models continue to operate at a loss.

      Europe shouldn’t blindly copy the U.S. hypergrowth model, fueled by deep capital markets and a high tolerance for deficits. We lack the financial firepower and the same risk appetite. Instead, we must pursue more selective, industrial, and efficient pathways.

      Open source is a strategic lever: it enables cost-sharing, broader access, reduced dependence on American platforms, and the development of specialized models without requiring tens of billions in capital. As Yann LeCun has noted, much of Meta’s early Llama development happened in Paris. The real challenge is turning conceptual strength into industrial power.

      According to estimates, AI could require up to 40 additional gigawatts of power in France. Should nuclear be seen as the absolute condition for digital sovereignty, or is a more pragmatic mix—nuclear, solar, renewables, and grids—now unavoidable?

      Nuclear is essential if France wants to maintain a controllable, decarbonized, and competitive electricity supply at scale. Industrialized AI cannot rely excessively on intermittent energy sources. But the challenge extends beyond nuclear: it’s about the entire energy system—grids, storage, hydropower, energy efficiency, and cooling capacity.

      Meanwhile, China is taking a more pragmatic approach: lower-cost infrastructure, more compute-efficient models, and aggressive hardware optimization. Beijing is also working to replicate Nvidia’s capabilities in the face of U.S. export restrictions.

      The global AI race is now moving at a pace incompatible with France’s bureaucratic inertia—not just in energy, but across the board. We need to recreate industrial and technological free zones: streamlined regulations and tailored tax incentives for innovation and critical infrastructure. The French paradox is that we once had one of the world’s most competitive energy and scientific systems, only to then systematically deindustrialize ourselves.

      Is France missing the AI value chain upgrade, left providing only energy, infrastructure, and expatriated talent while the U.S. captures the real value?

      The risk is real: France could end up confined to the lower rungs of the value chain—supplying power, hosting data centers, and exporting talent—while the U.S. monopolizes the high-value segments. But to reposition ourselves, we must first understand the sector’s current state, with its flaws and emerging opportunities.

      Beyond the inherent limitations of LLMs, much of the AI sector today is driven by highly speculative financial expectations. Many use cases remain difficult to monetize, even as compute and capital demands skyrocket in the age of agentic AI. The next wave may well come from AI deeply integrated into real industrial systems: robotics, automation, maintenance, defense, logistics, industrial simulation, and healthcare. The goal isn’t just to imitate OpenAI but to drive productivity gains through integration with physical production chains.

      With OpenAI’s rumored IPO at $850 billion, Anthropic at $900 billion, and SpaceX at $2 trillion, American giants will have the capital to lock in compute capacity and energy resources at a scale Europe can’t match. Is there still a realistic path for France and Europe to close the AI gap with the U.S. and China in the next two years? Could robotics be part of the solution?

      These valuations underscore America’s financial dominance. These companies can raise sums that secure semiconductors, data centers, and energy contracts on a scale beyond Europe’s reach.

      Europe has also trapped itself in a regulatory labyrinth, particularly with the AI Act. Multiple European states and companies have pleaded for adjustments to preserve industrial competitiveness—only to see their concerns overlooked. Meanwhile, Donald Trump merely had to demand that Ursula von der Leyen fall in line with U.S. interests—and she complied.

      France and Europe can still build strong positions in areas where we have industrial, scientific, or even energy advantages. Robotics is a prime example: it combines software, sensors, mechanics, power electronics, and industry—even if we don’t cover every link in the chain.

      Physical AI offers an alternative to consumer-focused, chatbot-driven applications. Advanced industrial robotics delivers direct gains in competitiveness, productivity, and reindustrialization. This is likely where we have the best chance to create synergies with our industrial base.

      Read the full interview on Atlantico.

    • Reopening the Strait of Hormuz: Toward a Frozen Conflict amid US Political Paralysis

      Reopening the Strait of Hormuz: Toward a Frozen Conflict amid US Political Paralysis

      English transcript of my interview on France Info TV – 29 May 2026.

      Hello, Rémi Bourgeot. At the heart of this issue, as always, is money—the economy. In Donald Trump’s decisions, just minutes ago, we were told the U.S. president wanted to take his time before possibly announcing his decision on the Iran deal. And now, we see things accelerating. Do you see an economic dimension here?

      Rémi Bourgeot: Absolutely, this is the primary source of pressure on Donald Trump, stemming from the global economy and the U.S. economy. So he’s under this urgency.

      But today, he’s also facing internal divisions. Personally, he quickly realized the disaster that the U.S.-Israeli campaign against Iran had become, especially since he’d been promised it would only last a few days.

      On the American side, he’s dealing with tensions from parts of the Republican Party, particularly the neoconservatives, who oppose any diplomatically realistic agreement. And then there’s the pressure from Israel, which—at least from Benjamin Netanyahu’s perspective—has no interest in reaching a deal with Iran, let alone one with regional repercussions, especially regarding the war against Lebanon. So the situation remains highly uncertain.

      For the Americans, the core issue is still nuclear. Yet we also see the weight of Iran’s position and the immense military challenges—on top of the economic difficulties the U.S. faces—having to concede to Iran’s main demand: delaying a nuclear agreement. Let’s not forget that under Obama, such negotiations took years. Today, the discussion is about Iran committing not to develop nuclear weapons—but that’s already the case. The negotiations focus on civilian nuclear programs and enrichment levels to prevent Iran from being in a technical position to develop military nuclear capabilities.

      We’re seeing a situation of extreme difficulty for the United States. Trump has recognized the deadlock he’s in, but he’s facing massive opposition and pressure, with all this back-and-forth and incredible uncertainty. And the negotiation process itself is quite surprising: he’s being asked to approve something that, in theory, he himself is supposed to negotiate—because the negotiators have a very limited mandate.

      So the parties are indeed trying to agree on reopening the Strait of Hormuz, which was fully open before this conflict. But beyond this partial agreement, tensions remain extremely high with the U.S., which is struggling to acknowledge this strategic defeat.

      Rémi Bourgeot, you’re still with us. Are we talking about war, potential solutions to the conflict, or not? And are we mainly discussing nuclear and oil issues?

      Yes, I think it’s fair to say that even if an agreement is reached, it would be a very partial one. In reality, the situation would look much more like a frozen conflict than a peace deal. The goal is to reopen the Strait of Hormuz and, for now, set aside the nuclear issue for a potential future agreement—because such negotiations take a very long time.

      What’s happening right now is that Donald Trump feels the need to include the word “nuclear” in his announcement. But in reality, this isn’t a genuine concession, since Iran isn’t developing—and did not intend to develop—a military nuclear program. That wasn’t the issue.

      As for enrichment, even for civilian or experimental purposes, concessions were already on the table. For Iran, the key is maintaining the ability to enrich uranium. So we’re seeing the situation unfold as it has over the past three months.

      This is a strategic debacle for the United States and for Israel as well. Trump is facing immense difficulty in reaching an agreement, even though he’s been trying for two months to extricate himself from this situation.

      The most significant concession from Iran seems to be over control of the Strait of Hormuz. Even if they adjust access or transit conditions, or reopen the strait in coordination with the Americans, they’ve demonstrated what some have called their own “nuclear weapon”: the ability to control the strait, albeit with very limited means compared to, say, their ballistic missile program.

      So we’re looking at a situation that leans toward a frozen conflict, with the prospect of a nuclear deal coming later. The positive side is that there’s a shared will to reopen the Strait of Hormuz and make mutual concessions. But there’s still a major roadblock on the U.S. side, which Trump must overcome to realistically achieve any kind of breakthrough.

      Thank you, Rémi Bourgeot, for your analysis.

      This automatic transcript has been edited for the sake of clarity.

    • War Deepens the Industrial and Social Crisis

      War Deepens the Industrial and Social Crisis

      Interview on France 24 in French with journalist and novelist Aude Lechrist and in English with William Hildebrandt on how the Middle East war derails the West’s economic, industrial and social model further. Translation of the French interview below the English video.

      Aude Lechrist: In France, as elsewhere in the world, the closure of the Strait of Hormuz is making itself felt. Trade unions are pushing for wage increases, particularly as inflation makes a comeback. To help us understand how workers are being affected by today’s upheavals — the geopolitical situation, climate pressures, and the dizzying pace of advances in artificial intelligence — we are joined by Rémi Bourgeot. Thank you for being here. First, are workers facing the same pressures the world over?

      Rémi Bourgeot: Extreme globalization has taken hold, creating significant transmission belts running through industrial models — but alongside that, vastly different policies have been pursued on either side of the divide. The fast-developing countries of Asia have pushed industrial policies, import substitution strategies, and drives toward productive self-sufficiency. The West, by contrast, has undergone rapid deindustrialization over the past few decades.

      And yet Asia is heavily affected today on the energy front, even though China in particular had put anticipatory policies in place. This crisis feeds directly through to workers, to job opportunities, and to cost pressures stemming from globalized supply chains — though that globalization is now somewhat in retreat, as countries seek greater autonomy and resilience.

      So workers are immediately more exposed — that much is clear from the geopolitical context. What knock-on effects are you observing?

      The economic consequences are immediate and concrete — the energy crisis, for instance, has brought production lines to a standstill. Economists point to fractions of a percentage point being shaved off overall GDP, but the real issue is a crisis of the real economy, the physical economy, of supply chains. For many countries around the world, that is precisely what drives economic and industrial development.

      And just about everywhere, questions of industrial development, genuine development, educational development are back at the centre of the debate — because these are the factors that determine long-term growth prospects and the opportunities open to workers.

      A major fault line has opened up between countries that believed growth could rest indefinitely on services — particularly financial services — and others that have followed a more traditional development path, reminiscent of postwar Europe: industrial development, educational development — which opens up more opportunities for workers, even if working conditions are sometimes very tough.

      But right now, an inflection point has clearly been reached: developed countries no longer have a functioning growth model.

      Artificial intelligence, which you mentioned at the outset, is also reshuffling the deck — particularly through its applications in robotics, which will increasingly affect manual workers, in addition to office jobs. And again, that fault line is visible, with the development model unraveling across much of the Western world.

      The United States has managed to stay ahead on the digital front and now in AI. How do you read that, especially against the backdrop of the Strait of Hormuz crisis — given that the key investors are the Gulf states?

      The development model has genuinely unraveled right across the Western world. The United States holds the high ground technologically, but on the premise that it can keep pushing indefinitely down a path heavily dependent on financial flows and foreign capital — particularly from the Gulf.

      The announcements from Sam Altman and OpenAI have been staggering — trillions supposedly raised in the Gulf to fund data center infrastructure in the United States and beyond. And the financial structures taking shape among players in this sector have all the hallmarks of a bubble — customers being financed by their own suppliers like Nvidia, investments completely untethered from economic and industrial reality.

      And yet genuine innovations do exist, and there is extraordinary talent out there, even from a purely technological standpoint. AI researchers like Yann LeCun argue that generative AI and LLMs are running into a dead end because of their intrinsic errors — something anyone who uses these tools day to day can see for themselves. Other technologies need to be developed, and that is already happening, particularly for robotic applications in the real world.

      But the moment an innovation appears, vast financial edifices get built up around it that have little to do with actual economic, industrial, or human development.

      And then there is the fear among workers — Americans in particular — who see an economic crisis on the horizon. Trade unions are clearly gearing up for major action. Labor Day in the United States is separate from International Workers’ Day, but significant mobilization is expected today all the same. Donald Trump has clearly done very little to address the concerns of American workers.

      Yes, and that is the great paradox. All the wavering, the U-turns, the chaos surrounding Donald Trump tell the story — he was supposed to upend the system in favor of reindustrialization from his very first term. Efforts were made in that direction, but the personal competence simply was not there, nor were the right people around him, to deliver a genuine industrial policy — not even on the tariff front, when it came to applying duties where they were actually needed, where domestic production could realistically be substituted or rebuilt at an acceptable cost.

      And yet that question did get put on the table — one that recurs throughout American economic history, as it does in the history of any country pursuing industrial development.

      When the Democrats returned to power, they largely continued in the same vein of industrial realism, of attempted reindustrialization — more through subsidies than tariffs, but still within a broadly protectionist logic.

      And now, with this new Trump term, the result is a bizarre and catastrophic world of blunt-instrument measures that get walked back almost immediately, with no strategic underpinning and utterly chaotic trade negotiations. The negotiators — on trade, but also on geopolitical, diplomatic, even military matters — have no idea what they are doing. Some of them can barely find the countries in question on a map.

      The chaos that has ensued points to a very deep systemic crisis — a crisis of American society and of Western society more broadly — an inability to bring about political renewal, or even basic reform, that would reconcile human and industrial development with the realities of globalization. That can only deepen the anxiety of workers who already see a vast gulf between the uncertainty generated by outside forces — conflicts, tensions, climate risks, artificial intelligence — and their governments’ capacity to respond, compounded by the interdependence between all these countries.

      That is genuinely alarming — because beyond all the political divides, the different countries and currents of opinion, there actually is a broad shared diagnosis: reindustrialization is needed. And yet nothing happens. Promises are made and forgotten.

      You said as much about the United States, but Europe is no different — if anything it is worse, having missed every significant technology wave over the past twenty or thirty years. The engineering expertise is still there for now, but it is eroding. And has the appetite for innovation gone with it? Is it no longer what drives students who dream of building a better world? Do you share that concern?

      What keeps me from losing hope entirely is that talking to young people — students in engineering schools, in other fields, in the humanities — one still finds that curiosity, that intellectual energy. Despite the decline of the education system, a wealth of tools exists online, countless ways of accessing knowledge — with their strengths and their limitations — that still allow people to learn, to catch up, to make discoveries. The curiosity is very much alive.

      The problem lies in the economic, political, and industrial system as it stands, which crushes that creativity. Entrepreneurship is a case in point — starting a business is an uphill struggle in Europe and in France especially. And at the level of larger companies and public bodies, reindustrialization is talked about endlessly but always in the vaguest of terms.

      Looking back, what has been the real impact of Emmanuel Macron’s two terms on workers in France?

      There has been a genuine slippage. A commitment to entrepreneurship was at least proclaimed, but it was mostly rhetorical from the outset. The occasional junior minister had a genuine grounding in the real economy, but overall, a headlong rush toward deindustrialization has unfolded, dressed up in rhetoric pointing in the opposite direction — toward rebuilding France’s industrial fabric. The means simply have not been there: the human resources, the investment decisions at the national level, the European coordination.

      Then there is the energy pricing system, which is extremely damaging for the French economy. France should enjoy a competitive advantage thanks to nuclear power, but that advantage is largely neutralized by the European pricing mechanism — a trap the country remains locked in.

      On top of that, the strategy of kicking the can down the road goes back to the introduction of the euro. The trade balance has been deteriorating and in the red since the start of the eurozone. This ongoing decline has been masked by the illusion of monetary stability — but with debt soaring and interest rates rising, that cannot go on indefinitely.

      What is really lacking is a technological, industrial, economic, and human understanding — including in terms of skills — to get an industrial development agenda back on track. That is exactly what other countries are doing, not that their models should be copied wholesale — China being the obvious example. A genuine boom in industrial development and technological expertise is underway in China today, comparable to Japan’s spectacular catch-up across every technological front forty or fifty years ago.

      France has extremely strong expertise — pockets of world-class engineers, outstanding skills, including in mathematics — and none of it is being properly put to use.

      Rémi Bourgeot, thank you very much for joining us — a fascinating conversation. Thank you.

    • Industrial Disruptions and Geopolitical Shift

      Industrial Disruptions and Geopolitical Shift

      Click on the image to view the video on LinkedIn – Full transcript below the summary on this page

      On France 24, I discussed the deep industrial impact of the Iran war and the shift in political bargaining:
      – Economic forecasts tend to account poorly for shocks in the physical world, focusing on market price variations and assuming substitution. The main economic damage lies in material shortages and supply chain disruptions, from energy to fertilizers to helium for chips manufacturing…
      – Geopolitically, Trump’s grand bargain on uranium enrichment has stalled. With a peace deal a distant prospect, sanctions relief for Iran is off the table as well. More focused steps should now center on the strait: the level of Iranian control, the lifting of the US blockade, and some international coordination.

      Full transcript of the interview:

      Good morning, Rémi, and thank you very much for being with us. Can I start by asking you what the immediate effects of the Iran war have been economically, beyond the fuel crunch, which of course everyone is very familiar with?

      This situation in energy markets isn’t just a story about rising oil and gas prices—it’s really disrupting supply chains all over the world in critical aspects. It’s about energy imports for many countries, especially in Asia, and also in Europe, but to a lesser extent. But it’s affecting some industries very, very heavily through price surges and shortages.

      There was little awareness in the beginning that critical components like helium would disrupt supply chains in production, such as semiconductors and chips generally. So it’s really a global crisis sparked by these shortages and by the way production is being disrupted.

      It’s not just about economic statistics or making assumptions about how GDP might be affected over a three-month horizon. It’s a much deeper crisis, really affecting supply chains. And that goes beyond the scope of just short-term economic monitoring and forecasting. It’s a real industrial crisis with so many ramifications—also for food production, in terms of fertilizer imports for so many countries.

      The Gulf has become so critical, not just beyond energy. Energy is obviously key, but we see all these ramifications, and this is affecting countries and industries across the world in very different ways. For some countries and social groups, this is having really dramatic effects—it can create situations of famine. You can go to such extreme levels.

      You mentioned helium there. Qatar exports 40% of the world’s supply, and it’s used in the production of semiconductors and pretty much across tech in general and other sectors. What might the societal repercussions of shortages in this sense mean for the world?

      It was somehow reminiscent of what happened during the COVID pandemic. Supply chains were heavily disrupted, and then there was also a boom in demand with fiscal support. So this is really running very deep into supply chains. You see disruptions everywhere.

      Some countries have stocks, so the effect is not immediate. It’s just like in energy markets—some countries have had this policy, this strategy of storing a lot of oil. That’s the case with China, which is supposed to be very dependent on the Gulf but is less affected in the short term thanks to this storage policy. So it applies to many countries and industries. But over time, after a few weeks and especially after a few months, you start to see much more concrete effects with these shortages.

      It means it’s really affecting production. It’s not just the rise in prices. There’s really a gap in production at the moment. This directly translates into decreased production. It’s not just about price signals or higher costs—it’s really outside the scope of usual everyday economic reasoning. It’s a crisis affecting the material world, not just economic models.

      Now, how critical is this for a lasting peace to be reached in this war? We’ve got an extension, an indefinite extension of the ceasefire, but that does not mean the war is over. Is there a big difference between the war continuing for another three to four weeks or the war continuing beyond that? Or is there already sufficient damage that will be felt for months to come?

      Well, it’s a critical distinction indeed. The prospect of a lasting peace or a lasting peace agreement, in my view, is still very distant. There’s been so much confusion in the negotiations—or in the talks, I should say—between Iran and the US, with this focus on the American part on the nuclear issue, even attributing statements to the Iranians which were completely unthinkable in their view. So negotiations have really not taken a good path in that respect.

      In the end, you have this prolongation of the ceasefire, and it’s indefinite. That’s really what matters in terms of relieving the pressure somehow. I think the talks are going to focus on the Strait of Hormuz and finding some kind of compromise—acknowledging Iran’s control of the Strait with some toll booth model.

      China, for example, has been pressuring Iran to take a moderate approach on the issue of fees. But the key focus right now is finding some kind of limited compromise rather than achieving a peace deal. The US doesn’t even have the proper negotiators to achieve any such aim. There’s been so much confusion on the part of the US to impose this kind of counter-blockade of Iranian ports and ships. It’s trying to have leverage on this specific issue of the reopening of the Strait of Hormuz to find some way with Iran.

      But the prospect of incorporating all the possible aspects of a deal, including nuclear energy and uranium enrichment, is really very ambitious and a very distant prospect.

      Now the UK and France are spearheading talks to open the Strait of Hormuz or to keep it open once the war comes to an end. We’ve often spoken of de-risking with regards to China from the perspective of Western countries, but is this an instance of European countries perhaps de-risking in the face of Washington’s current unpredictability?

      Well, I think when it comes to managing the Strait of Hormuz, it’s not so much a strategy towards the US. There will need to be some kind of international arrangement, even if Iran retains control over the Strait and charges fees. That’s why the Iranians were willing to make some arrangements with Oman to have this international dimension to the management of the Strait.

      Europe clearly can be part of it. There needs to be some agreement, some arrangement to reopen the Strait, to make traffic happen smoothly, to reassure insurers, and to return to some kind of business as usual. It won’t be like before—it will be a new situation, clearly—but it has to be a predictable one. That’s really the key issue here.

      That’s why the Europeans are all playing this part, trying to show this willingness to take part in an international system of cooperation guaranteeing passage—not free passage literally, but to create a kind of new normalcy for passage through the Strait. That’s really what’s essential. It’s not just Iran stopping its threats to ships and the US lifting their counter-blockade. You need to have a real kind of international arrangement for things to resume in some normal way.

    • The Art of the Non-Deal: Mishandling Negotiations Without Re-escalation

      The Art of the Non-Deal: Mishandling Negotiations Without Re-escalation

      Deescalation in the Iran war happened as the US administration sensed that continuation carried too much economic cost, as a result of the energy crisis. The argument holds more than ever, especially when it come to the threat of re-escalation. This process however did not lead to a phase of structured agreement but rather a halt to the conflict, with ambiguous rules. Markets have interpreted this situation as if it already meant long-term stabilization, assuming a level of general resolution that cannot be easily achieved.

      Donald Trump tried to leverage this situation as if it already contained the outline of a deal, and to accelerate the sequence accordingly. Although the Strait of Hormuz could be reopened with a limited, even implicit understanding, this aim has so far been defeated by the attempt to rush broad negotiations under extreme threats.

      His framing of Iran’s concessions on enriched uranium follows this approach, moving the public narrative ahead of the negotiation itself. He tried to transform deescalation into a political outcome that could be presented as victory to his audience, rather than as an exit from an unsustainable military stalemate. Political obfuscation surrounding a military outcome tends to disrupt any long-term stabilization.

      The nuclear issue does not compress easily, since it requires explicit steps. At the same time, Israel introduces a separate constraint, since its objectives and claims in the region contradict a prolonged deescalation. This too pushes the US side to rush negotiation, not because conditions are ready, but because the balance is unstable.

      Narrative over Negotiation

      Donald Trump has described Iran’s position on its nuclear program, particularly regarding enriched uranium, in terms that had not been agreed by Tehran. As in other negotiations, his tactics consist in attributing to the counterpart concessions that are expected rather than obtained, as if the process could be advanced by anticipating its conclusion publicly.

      This approach reflects an attempt to convert deescalation into a rapid political outcome that can be presented as a success. The objective is less the construction of a detailed and sequenced agreement — which would require time and technical alignment — than the establishment of a perception of movement on Iran’s core positions. The negotiation is thus partly shaped by political signaling of victory rather than convergence.

      This logic is closely linked to a form of brinkmanship, where pressure is assumed to generate linear responses. The underlying assumption is that Iran will adjust its stance whenever the United States modulates escalation or restraint. It leaves open the possibility of operations or coercive actions, particularly as a comprehensive nuclear agreement remains distant and structurally difficult to assemble. The risk is therefore not so much a return to full-scale war, but a cycle of episodic escalation within a still-contained and reversible configuration.

      An Off-ramp Constrained by Its Own Logic

      The underlying constraint remains a preference in Washington to avoid a renewed large-scale confrontation, given its economic and strategic costs. At the same time, the absence of tangible diplomatic results is difficult to acknowledge politically. This produces an intermediate position in which disengagement is pursued while being continuously framed as progress or even victory. This results in a configuration that neither leads to stability or restarting the war, but where fragility comes from the attempt to compress a process that remains inherently slow.

      Israel’s role adds a second structural layer of instability. Its regional objectives, including territorial gains and expanded military control clash with the prospect of a prolonged deescalation phase. The divergence is structural and long-term, as US popular support of Israel quickly erodes. In practice, this has required the US administration to rely on explicit pressure to restrain Israeli moves long enough to preserve a narrow window for accelerated negotiations with Iran. The difficulty is that this sequencing is already under strain.

      Hormuz and the Structure of the Stalemate

      The Strait of Hormuz remains the central variable. A durable normalization would require coordination on passage rules, some form of fees or regulatory mechanism, and a broader ceasefire framework extending beyond the Strait itself, including Lebanon. None of these elements are in place as a result of the excessive focus on a global deal including the nuclear issue.

      The recent sequence highlights a persistent misalignment. The United States has maintained pressure while expecting functional normalization, while Iran has treated the Strait as a lever of negotiation rather. In practice, any sustained reopening requires coordination, even in the absence of a comprehensive agreement.

      External actors further complicate the picture. China, in particular, has been critical of a regime of fees that would alter flow conditions, while offering substantial material support probably more valuable than the toll booth model. This increases pressure on Iran to accept arrangements that preserve access. The equilibrium therefore depends on a balance of constraints and opportunities rather than only on a formal diplomatic settlement.

      At this stage, two broad configurations remain plausible. The first is the emergence of a partial framework, limited in scope but sufficient to organize coordination around the strait and establish minimal normalization conditions. This would allow Iran some economic space while leaving the nuclear issue only partially resolved. The second is a more explicitly frozen conflict, where no agreement is reached but where a managed status quo emerges, including conditional reopening of the Strait and continued tactical coordination between actors.

      For markets, many pricing assumptions remain built on simplified scenario frameworks that understate the institutional fragility of the situation, particularly around energy flows. The current situation should be understood as a reorganization rather than a resolution. Deescalation provides a temporary equilibrium, but it is increasingly exposed to attempts to convert it into a rapid political success without the institutional basis required to sustain it. Though the rationale for deescalation is more present than ever, the gap between political acceleration and structural constraint defines the fragility of the current situation.

    • Energy Markets Will Remain Shaped by Iran’s New Status Quo

      Energy Markets Will Remain Shaped by Iran’s New Status Quo

      Op-ed in Les Echos, 11 April, 2026.

      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.

      The rest of this piece is available on Les Échos website in French. For similar insights, see my April 1, 2026 article, which already analyzed the implications of a looming de-escalation—with Iran’s de facto control over the management of the Strait of Hormuz: Partial Normalization in Energy Markets After Iran War Deescalation.

    • Iran to Control Reopening of Strait of Hormuz

      Iran to Control Reopening of Strait of Hormuz

      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.

      For more on the energy crisis and the Strait of Hormuz, read Partial Normalization in Energy Markets After Iran War Deescalation.

      This transcript has been slightly edited for clarity.

    • Partial Normalization in Energy Markets After Iran War Deescalation

      Partial Normalization in Energy Markets After Iran War Deescalation

      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.