MacroVoices #554 Dr. Anas Alhajji + Louis-Vincent Gave: Developing Crises in Middle-East and France

Dr. Anas Alhajji described a “three C’s” crisis spanning the Gulf, Red Sea, and Black Sea, disrupting energy, fertilizer, and agricultural trade. Saudi Arabia has raised the capacity of its East-West oil pipeline from 5.5 million to 7 million barrels per day and aims to move as much as 10 million barrels per day around the Strait of Hormuz. A proposed route through the Empty Quarter to Oman and the Arabian Sea could also connect Iraq and Kuwait, though construction would take an estimated two to three years after studies and approvals. Saudi Arabia has temporarily repurposed a gas pipeline to carry an additional 1.2 million barrels of oil per day through May, while the UAE is building a second pipeline.

Alhajji cautioned against treating estimates of Hormuz flows as evidence that oil trade has recovered: US Energy Secretary Chris Wright put flows at 80–90% of pre-conflict levels, or about 13–14 million barrels per day, but the figures could reflect double counting, unclear cargo composition, or a single-night snapshot. Oil-product flows were only 25–35% of pre-crisis levels, and lost Gulf diesel supply had not been recovered. The Black Sea crisis had removed 3 million barrels per day of crude and 800,000 barrels per day of diesel, while refinery capacity had also been lost in the US, Europe, Russia, Saudi Arabia, and the UAE. Export bans, rerouting, and hoarding are worsening diesel shortages, which Alhajji expects to persist; attacks on refineries can consequently damage farming and livelihoods far beyond the conflict zone.

Refinery disruption could sustain high crack spreads until new capacity is built, a process Eric said can take about 10 years; the futures curve’s back end rising toward elevated front-month prices suggests markets expect disruption to last. Alhajji does not expect benchmark oil to reach $200, but said the ceilings on crack spreads and demand are key questions. He noted that US oil-demand growth forecasts for 2026 were 160,000 barrels per day from the IEA and 110,000 from OPEC, while demand averaged virtually flat year over year in the first seven months. China has spare refining capacity but restricts product exports through quotas, and refinery closures in Europe and California have strengthened its position. Meanwhile, China–Russia oil trade via the Northern Route was near record highs over the prior two months.

Alhajji also argued that geopolitical decisions and European involvement will shape the Ukraine conflict: he does not expect an agreement to move forward without Europe, after Putin proposed a summit with Trump and Xi Jinping without inviting Zelensky. Louis-Vincent Gave described France as in a political crisis after two to three years of conflict among three parliamentary blocs unable to agree on a budget. France’s deficit is about 5% of GDP, but tax receipts already equal roughly 44% of GDP, versus 24–25% in the US. Gave sees little room to raise taxes and believes increases could reduce revenue. He likened France to an emerging-market debt crisis because it borrows in a currency it cannot print; with most French debt now held by foreigners, he said French bonds pose a career risk. Markets were pricing three ECB rate hikes, which he said would not occur.

Gave sees France’s social division as part of the political risk: urban globalization winners in Zone A, migrant service workers in Zone B, and rural voters in Zone C, where Marine Le Pen’s Rassemblement National is strong. He said Zone A has kept power by dividing Zones B and C but is running out of money for transfers to Zone B; Le Pen is polling in the mid-40s, and Gave expects voters worried by unrest to turn toward Zone C’s protection. He said the economic bind requires either raising the retirement age to 70 or devaluing the currency by 50%, which is impossible within the euro; no presidential candidate, with the election due in six months, is proposing either. A French default, restructuring, or euro exit could spread losses through European pension funds, insurers, and banks, as well as Japanese and US insurers, and could disrupt derivatives if French assets were redenominated while bank liabilities stayed in euros. ECB debt monetization or EU stakes in financial institutions might help, but would not make a crisis harmless.

Energy costs could amplify that political danger: Gave said diesel prices had doubled, and higher fuel costs feed into food and other prices as governments approach the limits of consumer and business support. If the energy crisis lasts into 2027, access to oil, diesel, or gasoline could become a critical problem even for the EU. In markets, WTI was near $100 and Brent approached $112, while depleted inventories and stronger longer-dated contracts pointed to tight conditions; a further oil breakout could lift inflation expectations and unsettle bonds. The S&P 500 was near 7,700, with breadth around 20% and the Magnificent Seven about 35% of the index; a break in major-tech support could bring a correction amid pressure on AI shares and weak credit conditions. Gave identified France, energy, and a possible end to the AI capital-spending boom as converging tail risks.