The IMF’s blind spot : why we’re not ready for the 2026 energy shock

On March 28, 2026, the International Monetary Fund published its revised forecasts for the global economy: a 0.2% contraction in GDP, described as “moderate turbulence.” Six days later, Tehran confirmed the destruction of two Saudi oil terminals and an Emirati refinery. Between these two dates, no European government revised its budget assumptions. No central bank published an alternative scenario. No finance minister spoke up to prepare the public.

This silence isn’t caution. It’s unpreparedness turned into a method. For three weeks, every signal has been converging toward a major economic crisis, comparable to that of 2008 in its violence and perhaps greater in its speed. Yet Europe’s institutions keep flying blind, armed with forecasting tools that date from an era when wars didn’t halt supply chains and when energy flowed without interruption.

The time for macroeconomic reassurance is over. The time has come for methodological clarity and emergency political action.

When economic models meet reality

The IMF’s reassuring estimates rest on three assumptions that no longer hold.

1. First flaw: the geopolitical scenario. The April report assumes a “temporary blockade” of the Strait of Hormuz, lasting four weeks at most. But as of April 15, what needs modeling is no longer a blockade, it’s physical destruction: three Iranian refineries are offline for eighteen months minimum, two Emirati terminals are being rebuilt, and Saudi infrastructure is taking weekly strikes. The word “temporary” loses all meaning when the concrete is burning.
   
2. Second flaw, more structural: the methodological toolkit. Standard macroeconomic models reason in prices, not volumes. They calculate the impact of a rise in the price of a barrel on aggregate demand, inflation, interest rates. But they don’t know how to handle a situation where the problem isn’t that oil is expensive, but that it no longer arrives. For that, you’d need to bring in Leontief-type input-output matrices, which map sector dependencies in terms of physical flows. If Germany lacks the gas to produce steel, what matters for Renault isn’t the price of steel: it’s the fact that it no longer exists.
   
3. Third flaw: implicit linearity. Standard models assume that a 5% drop in energy supply produces a proportional economic contraction. That ignores threshold effects. Between -3% and -10% of available energy, the relationship isn’t linear: it becomes exponential. Production lines stop abruptly, buffer stocks run dry, companies switch into survival mode. A 10% loss of energy can trigger a 15% drop in production in heavy industry. The economists who worked on the oil shocks of the 1970s know this. But that work was left in a drawer, replaced by general-equilibrium models that assume automatic adjustment through prices.

The result: the IMF underestimates the impact by a factor of four to five. This isn’t an academic quarrel. It’s a navigation error that will cost billions in poorly calibrated public policy.

What really lies ahead

If you take the available data (destroyed refining capacity, interrupted supply flows, reconstruction timelines) and feed it into a volume-based rather than a price-based model, the picture changes radically. For developed economies, the expected GDP contraction sits around -1.5% as an annual average, with marked national variations. Germany, hyper-dependent on heavy industry and energy supply chains, should suffer a recession on the order of -2%. France, deindustrialized but exposed through its German imports and its transport costs, would take a hit of about -1.3%.

These raw figures don’t tell the whole story. The shock will unfold in three successive waves. First, the direct effect of physical shortages: helium for semiconductors, aluminum for aerospace and automotive, sulfur for fertilizers. Then, the knock-on effect of the neighbors’ recession: when Germany catches a cough, French industry catches a cold. Finally, and this is the most insidious, the third-round effect: that of surprise and panic. When economic actors realize the crisis is neither short nor manageable, they overreact. Companies stockpile, households postpone purchases, banks tighten credit. This defensive reflex mechanically amplifies the contraction.

The peak of this crisis should hit between late 2026 and early 2027. Physical shortages will materialize as early as May or June, hitting energy-intensive sectors first. The fall in German industrial output will ripple through to France in the third quarter. The impact on French households’ real incomes (through inflation and rising transport costs) will be fully felt in the first quarter of 2027. By then, inflation will exceed 5%, against the 2.1% forecast by the Banque de France in March. The gap between forecast and reality will reach a level impossible to paper over with technical adjustments.

France will absorb this shock in a specific way. Unlike Germany, it no longer has enough heavy industry to take the full brunt of input shortages. But it depends heavily on German imports for its residual productive base, and its households will be hit head-on by the explosion in energy and transport prices. France’s crisis will therefore be a crisis of income before it’s a crisis of production: purchasing power slashed, fuel up 40%, energy bills unbearable for the middle and working classes. Meanwhile, logistics and construction companies will see their costs explode without being able to pass them on in full. Cascading bankruptcies are to be expected.

Action or paralysis

Faced with this picture, the French government’s silence borders on irresponsibility. Not that we should give in to panic, but the truth is a prerequisite for collective action. Yet no speech of preparation has been given. No emergency plan has been presented. Citizens will discover the reality the moment it slams into them, without having had time to organize. That’s the surest way to turn an economic crisis into a social one.

This posture is nothing new. As I documented in SCAF, IRIS², AI: Why France Prefers to Regulate Its Decline Rather Than Build Its Future, our institutions chose long ago to manage the slow slide rather than prepare for the future. But faced with an exogenous shock of this magnitude, paralysis will cost more than action.

Two levers do exist, however, and they must be pulled simultaneously.

First lever: energy diplomacy

Limiting the physical shortage means rapidly diversifying supply sources. In the current context, only one player has underused oil and gas production capacity: Russia. It holds roughly 12% of the world’s currently idle refining capacity, along with gas infrastructure that could be redirected toward Europe. Opening negotiations with Moscow has nothing to do with a geopolitical preference. It’s an arithmetic necessity. If Europe dithers, Asia (mainly China and India) will capture the bulk of this supply by July. Every week of delay costs tens of billions in lost contracts and in increased dependence on vulnerable maritime supply routes.

Of course, the European Union won’t move as one bloc. Some countries (Hungary, Slovakia) have already quietly renegotiated their gas contracts. Others (Italy, Austria) are hesitating. France remains a prisoner of its Atlanticist line, unable to distinguish national interest from moral posturing. If Brussels can’t act, a coalition of willing countries must form. Germany, despite its ideological reluctance, could swing if its recession worsens in the second quarter. It’s time to prepare for that shift rather than endure it through improvisation.

This question of energy sovereignty points to a deeper problem: the European Union’s structural inability to defend its interests in the face of geopolitical power dynamics. When might makes right, moralizing speeches don’t feed the factories.

Second lever: emergency fiscal policy

The mechanical inflation on the way (+3.4% relative to initial forecasts) will create a contradictory budgetary effect. On one side, VAT on energy and fuel will generate immediate additional revenue, potentially between 15 and 20 billion euros. On the other, the recession will cause corporate income tax to collapse, and if part of France’s debt is indexed to inflation, the interest burden will explode mechanically. The net balance remains uncertain, but even in the pessimistic scenario, the additional energy revenue genuinely exists. It must not be left in the coffers of Bercy (the French finance ministry) to artificially improve the deficit ratios.

Concretely: extending the price shield to electricity and fuel for the bottom two income deciles. Targeted energy vouchers, indexed to household composition and geographic area. A moratorium on bankruptcies for SMEs in construction, transport, and logistics, paired with zero-interest guaranteed loans to help them get through the peak of the crisis. These measures aren’t feel-good Keynesianism. They’re the bare minimum to keep the recession from turning into social collapse.

A new budget must be submitted to Parliament by mid-June. Not a cosmetic supplementary budget, but a text that fully incorporates the new macroeconomic assumptions and deploys the necessary protective tools. As I analyzed in Budget 2025: Is Mortgaging the Future Still Acceptable?, the question is no longer whether we should act, but when we’ll stop pushing the bill onto the generations that follow.

If the government refuses, there’s a constitutional lever: Article 47 allows the National Assembly, in the event of executive inaction, to vote a constructive no-confidence motion carrying an alternative budget. The members of parliament from all sides who are demanding this debate today aren’t playing political opposition. They’re doing their job as representatives of the nation.

A last chance to prepare for impact

Crises can’t always be avoided. But they can be prepared for. The one coming is visible. It can be modeled. It can be anticipated. It demands a response equal to its scale: pragmatic diplomacy, a crisis budget, a discourse of truth. Every day lost denying the obvious is one day less to organize collective resilience.

The country doesn’t need official optimism. It needs institutional clarity. As I wrote in The Illusion of a Finite World, growth isn’t a moral luxury, it’s an existential necessity. Faced with an exogenous shock that will cut our productive capacity by 1.5%, standing still isn’t a conservative option: it’s collective suicide.

The politicians who choose to look away today won’t be able to say they didn’t know. They will simply have chosen not to act. And that inaction, in the face of a foreseeable crisis, has a name: dereliction.