France is heading for a sharp rise in inflation this spring as soaring oil prices linked to the conflict in Iran erode household purchasing power, with growth expected to slow in early 2026, the national statistics agency said.
Insee expects growth of 0.2 percent in both the first and second quarters, down from 0.3 percent previously. At the same time, inflation is forecast to climb above 2 percent in the spring after running at less than 1 percent in February.
The Middle East conflict, which began on 28 February, pushed oil prices to around $100 a barrel, compared with an average of 63 dollars at the end of 2025. The impact has been quickly felt at petrol stations.
“The surge in hydrocarbon prices would translate in France, as elsewhere in the world, into a marked rebound in inflation, which would go above 2 percent during the spring,” Insee said in its updated outlook.
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Holding for now
Despite the shock, growth remains stable in the short term.
“At the very short term, growth is holding up thanks to the recovery momentum in the euro zone,” said Dorian Roucher, head of Insee’s economic outlook department, told business daily Les Echos.
Insee has only slightly lowered its forecasts despite the shock. Les Echos reported that growth carry-over could reach 0.9 percent by mid-year, matching the country’s total growth in 2025.
“At this stage, Insee’s forecasts do not lead us to revise our own forecasts in either direction,” Roland Lescure, the economy minister, told lawmakers on the finance committee.
But the pressure on households is expected to come sooner. Insee expects inflation to move above 2 percent by May. The agency now sees it reaching 2.2 percent by June.
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Household squeeze
The rise in prices is set to hit household finances. Purchasing power is expected to fall by 0.5 percent by mid-year, as wages have not yet adjusted to higher inflation.
“While they were gradually recovering the losses suffered during the inflationary wave of 2022 and 2023, real wages would decline again in the second quarter,” Insee said.
The increase is mainly driven by petrol and gas prices and has not yet spread to other sectors such as food. One exception is air travel, where higher kerosene costs are expected to push up ticket prices.
Households are expected to soften the impact in the short term by drawing on their savings, allowing consumption to hold up despite higher energy costs, Insee said.
“The main negative effects are more likely to be felt towards the end of the year,” Roucher said. “An oil price shock will have a much stronger effect on growth in 2027 than on growth in 2026.”
Insee estimates that a $40 rise in oil prices would cut growth by about 0.4 percentage points over a year. Meanwhile unemployment is expected to edge up to 8.1 percent by mid-2026.
(with newswires)
