The 2022 energy crisis clearly highlighted the issue of electricity prices in Europe – and, more broadly, the issue of energy prices. As a result, European manufacturers’ competitiveness has been severely undermined when compared with the United States and China. By reigniting tensions over electricity prices, the conflict that began in the Middle East in late February 2026 further underscores the continent’s vulnerability to fossil fuel imports, despite the expansion of renewable energy. Faced with an environment of potential sharp and sudden price rises, European governments do not have the same room for manoeuvre.
Seven months after the start of the war in the Middle East, which has led to a sharp rise in oil prices, sub-Saharan Africa is holding up well overall. The deterioration in external accounts and the rise in inflation are more contained than in 2022, during the last oil shock. However, this resilience is fragile and is eroding as the conflict drags on. Furthermore, an exceptional El Niño event could significantly worsen the macroeconomic environment in 2027.
The global economy’s unexpected resilience might have invited the self-congratulation that is a trademark of international official meetings. But policymakers gathered in Bangkok for the 2026 IMF Annual Meetings were wearily aware that “continued resilience cannot be taken for granted”, as noted in the prologue to the closing Chair’s Statement to the International Monetary and Financial Committee meeting. Growth forecasts remain in line with those made a year ago, when interest rates were much lower and no energy shock was in the cards, and even with those made in April, when a short shock was the base case
Rising energy prices are pushing inflation higher in Europe and the United States, while energy’s contribution is slightly negative in Japan. Over recent months (3m/3m), core indices have been firming in the euro area and Japan: a signal to watch. In Europe and Japan, pressure on producer prices is building. The risk of the energy shock spilling over to other CPI items is increasing. Markets (swaps) are pricing this rise in inflation into short-term measures. Long-term expectations (5y5y) are rising in Japan and the UK.
GDP growth is proving more resilient to shocks than anticipated. Second-quarter figures confirm this trend: despite rising oil prices, growth remains supported by various reflationary forces. At the heart of this cycle lies a clear driver: Artificial Intelligence (AI). Consequently, major global economies are ramping up investment in capital goods.
Overall, based on data available through September 2026, economic activity continues to show resilience. The high levels of business climate surveys illustrate this well. Household confidence, however, is more vulnerable and sensitive to energy price pressures. Financing conditions in emerging economies also continue to hold up well against the shock (much better than in 2022) as well as against the tensions in DM bond markets.
The overall picture from the confidence surveys available for September is globally positive. According to the PMIs, the business climate in services has indeed seen a clear improvement, and that in the manufacturing sector remains comfortably in expansion territory for the 8th month in a row. However, household confidence has recorded its first decline in 5 months, likely driven by rising inflation and concerns over purchasing power.
US macroeconomic performance has remained solid since the onset of the shock, as illustrated in particular by Q2 growth of +3.8% and +9% (annualized quarterly rate) in consumer spending and private nonresidential investment, respectively. In the manufacturing sector, business sentiment has gained momentum despite the shock, while the impact of this shock on the services sector has remained very limited. The immediate reaction of consumer confidence was, however, more negative before beginning to improve, which was nevertheless interrupted in August.
The average CPI inflation rate across the fifteen leading emerging economies stabilised at 4.3% year-on-year in August. The inflationary impact remains weaker than in 2022, due in particular to reduced spillover effects on agricultural and food prices. Manufacturers’ views on the trend in input and finished product prices have returned to their pre-conflict levels.
Oil and gas markets rose in September, primarily due to the resurgence of significant disruptions to hydrocarbon traffic in the Gulf. Red Sea flows have been constrained, while the substantial oil exports through the Strait of Hormuz remains fragile. In variation, the current rise in oil and gas prices exceeds the one recorded during the 2022 crisis, although in value, gas prices remain significantly lower than in 2022.
In Europe, the possibility of a US ban on diesel exports has heightened concerns about price trends for this widely used fuel, which has already risen significantly since the outbreak of the conflict in Iran. It has become a major political issue on both sides of the Atlantic in the run-up to decisive elections.
This latest issue of MacroWaves is devoted to the repercussions of the energy shock and the rise of AI in emerging economies. The spring of 2026 saw mounting risks: war in Iran, the closure of the Strait of Hormuz and soaring energy prices. Yet, against all expectations, emerging economies withstood the shock remarkably well.Lucas Plé and Hélène Drouot, both economists in the Emerging Economies team, help us understand this resilience. Why did the energy crisis not cause the economy to derail? Can the rise of artificial intelligence offset the negative impact of rising energy prices? What are the identified risks of this increased dependence on technology?
Overall, based on data available through August 2026, the inflationary impact and the negative effect on activity of the current energy shock remain significantly lower than the 2022 shock. Due to renewed tensions in the conflict in Iran and, consequently, on hydrocarbon prices, inflation is moving up again, but still in a limited way for now and driven solely by energy prices. Overall, confidence surveys do not show any signs of these negative trends.
In the Eurozone, the overall picture from the data available for August is positive in terms of confidence surveys and reinforces the encouraging signs seen in previous months. According to PMI surveys, inflationary pressures continue to ease, while supply-side tensions have stabilised. Business sentiment in the services sector remains stable, anchoring its previous gains, while confidence in the manufacturing sector shows a further—and marked—improvement. Another notable and encouraging development is the recovery in consumer confidence for the fourth consecutive month.
The US economy has held up well since the shock began. Consumption and business investment grew at a 4.1% annualized pace in Q2. At the same time, the scope for energy-driven disinflation has narrowed: WTI (the US reference) has averaged USD 82/bbl since 8 July, ranging between USD 72-92.
Inflation eased in June and July. The average CPI inflation rate across the fifteen leading emerging economies fell to 4.3% year-on-year in July, down from 4.8% in April. The inflationary impact remains weaker than in 2022, due in particular to reduced spillover effects on agricultural and food prices. Manufacturers’ views on the trend in input and finished product prices have returned to their pre-conflict levels. However, against a backdrop of increasingly frequent and destructive extreme weather events, pressure on agricultural and food prices is likely to continue.
Oil and gas markets remain volatile and followed different trajectories during August. The gas market does not benefit from the buffers in place in the crude oil market. Oil prices have stabilised at a high level, widening the gap compared to the 2022 crisis. While the increase in gas prices remains lower than that seen following Russia's invasion of Ukraine, the pace of the price increase is high.
Statistical agencies often revise growth figures a posteriori, and generally upwards. But this takes time, as their data often become more comprehensive and accurate after two years. France is seeing the largest upward revisions over this timeframe, and, generally, these revisions are more pronounced in Europe than in the United States.
The expectation that the surge in inflation, driven by this new energy shock, would be more moderate than in 2022 (with demand being less dynamic and supply less constrained) is confirmed. However, following the Memorandum of Understanding (MoU) signed in mid-June between the United States and Iran, inflationary risk has eased but has not disappeared. This MoU had seemed to reduce the risk of a severe escalation of the conflict, but since mid-July and the resumption of hostilities, it has entered a new phase of tensions, once again driving up hydrocarbon prices
The assessment of the July data is positive and reinforces the encouraging signals from May and June data. According to PMI business climate surveys, price pressures continued to ease, as did supply tensions through slightly shorter delivery times. The business climate in the manufacturing sector resumed improving, almost erasing the two months of previous decline. The business climate in the services sector and consumer confidence continues to recover. The July surveys are not impacted by the resurgence of tensions in the Middle East and by the ensuing rise in energy prices, partly because responses were, for the most part, collected beforehand. A relapse in August is highly likely if the geopolitical situation remains degraded
The memorandum of understanding, signed in mid-June between the US and Iran, improved US data before hostilities resumed in mid-July. Headline CPI posted its first monthly drop (-0.4% m/m) since 2020 in June, driven by gasoline prices (-9.7% m/m). It stood at 3.5% y/y, down sharply from May’s 4.2% but still 1.1pp above pre-conflict levels. Inflation excl. energy eased as well (-0.2pp to 2.7% y/y), edging back towards its February reading.
The acceleration in consumer price inflation since February 2026 is much less significant than in 2022, and it stopped in May and June 2026. The average CPI inflation rate for the fifteen main emerging economies was estimated at 4.6% y/y in June, against 4.8% in April. The inflationary shock is more moderate than in 2022 notably due to more limited spillovers to agricultural and food prices.
Oil and gas markets lack direction amid persistent instability in the Strait of Hormuz. While oil prices have thus far reacted similarly to the two energy shocks (2022 and 2026), the rise in gas prices remains lower than the increase seen following Russia's invasion of Ukraine.
In advanced economies, June inflation declined temporarily but bounced back in July, reflecting the moves in energy prices. Forward indicators of price pressures eased again in July. Long-term inflation expectations held steady as near-term expectations pulled back (UK excepted). At this stage, there is no sign of a wage-price spiral. In emerging economies, average CPI inflation fell back slightly in June after three months of increase. As for commodities, we see a broad-based rebound as tensions resurface.
Both the Eurozone and the US grew 0.4% q/q in Q2 2026. For Europe, that is a welcome upside surprise: growth landed in line with expectations (France, Germany) or above them (Eurozone overall, Spain, Italy), even as the Middle East conflict delivered an energy-driven inflation shock. It confirms that European growth rests on foundations solid enough to absorb this kind of shock. Country-level detail was incomplete on the day, but manufacturing business sentiment held firm across the board in H1, underwritten by a set of drivers (AI, defence, electrification, aerospace). US growth, by contrast, undershot expectations. But it remained robust, powered by AI investment and accelerating household consumption. Both, however, drew in imports fast enough to weaken the headline growth figure.
