In this edition: Signal of the week; on the radar; systemic insights; what I am reading; and one last thing.

Signal of the Week

Dire Straits: The Strait That Won’t Reopen

Despite the ceasefire framework agreed in early April, the world’s most critical maritime chokepoint, the Strait of Hormuz, remained severely disrupted and highly abnormal for commercial shipping this week, keeping energy markets trapped in geopolitical limbo and the international economy in a heightened state of turbulence. The lack of progress is a big concern, and the diplomatic silence is this week’s strongest signal.

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Horizon is a strategic briefing that tracks the political, economic, and business signals reshaping the international system, every Saturday morning (CET).

In this edition: Signal of the week; on the radar; system insights; what I am reading; and one last thing.

Signal of the Week

EU to Shield Households and Industry from the Fossil Fuel Price Surge

Who says lightning never strikes twice? In fact, lightning seems to prefer to strike the same place twice. For the second time in less than five years, Europeans have been struck again by a bolt from the blue and are yet again paying the price of Europe’s dependency on imported fossil fuels.

This week, the European Commission proposed “new actions to protect Europeans from the fossil energy crisis,” combining short‑term relief for households and industry with a push toward clean energy independence and reduced exposure to volatile fossil fuel markets.

At last month’s EU Council meeting, EU heads of government requested “a toolbox of targeted temporary measures to address the recent spikes in the prices of imported fossil fuels arising from the crisis in the Middle East”. The measures were also a topic of discussion at the Informal European Council in Cyprus this week.

Key Details:

• Impact: The EU says it has spent an additional €24 billion on energy imports due to higher prices since the outbreak of hostilities in the Middle East, without an increase in energy supply.

• Immediate relief: The Commission has proposed to adopt a State Aid Temporary Framework, intended to provide additional flexibility for national governments, including emergency measures to support the most exposed economic sectors. It will also coordinate with member states on refilling of underground gas storage, use of flexibilities in filling rules, and any exceptional releases of oil stocks.

• Strategic shift: The measures seek to accelerate a pathway towards homegrown clean energy independence, away from volatile fossil fuel markets, aligning with the broader Green Deal Industrial Plan and clean‑tech push.

• Industrial dimension: In the coming months, the EU Commission is also expected to present an ambitious Electrification Action Plan to remove barriers to the electrification of the industrial, transport and building sectors. It also intends to present a legislative proposal to ensure, among others, that electricity is taxed less than fossil fuels.

• Investment boost: The Commission has committed to assisting Member States to make maximum use of available EU funding and will also organise a Clean Energy Investment Summit to accelerate private financing.

• Regulatory pipeline: The EU is also consulting on revisions to its sustainable-finance framework and on post-2030 energy rules, including the taxonomy, renewable energy, and energy-efficiency regimes, which will further shape capital allocation and compliance costs.

Sources: EU Commission EU Commission+1 Cyprus Presidency of the EU

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On the Radar

It was reported this week that the European Commission also intends to launch a fertiliser strategy on 19 May in response to war-driven supply shocks. This is in the context of rising global prices for key inputs, such as urea, which have surged 55% since February.

Key details:

• Fertilisers are a key input for EU food security.

• Rising fertiliser and other farm-input costs tend to pass through into higher food prices and compress margins for European food processors and retailers.

• The EU aims to boost domestic fertiliser production capacity in a move towards stronger resilience to global market volatility.

• The strategy includes potential regulatory changes and decarbonisation goals.

• The move complements broader EU energy security interventions.

• It reflects a wider trend of strategic autonomy and diversification in critical supply chains.

• It’s a proactive move as EU ⁠farmers are reportedly not currently facing a fertiliser shortage.

Source: Reuters

System Insights

EU energy and industrial policy: The EU’s latest actions to mitigate the fossil fuel crisis sit within a broader shift toward an activist industrial policy, consisting of the Green Deal Industrial Plan, clean‑energy transition funding, and sustainable finance reforms. It signals that EU policymakers see the fossil fuel shock as both a social risk and a threat to competitiveness, and that they are willing to intervene.

Europe is trying to find opportunity in a crisis and turn vulnerability (energy dependence, climate exposure) into a competitive advantage (clean‑tech manufacturing, efficient energy use, resilient supply chains). For European businesses in particular, this means more subsidies and support but also more conditionality, reporting, and regulatory complexity.

This, together with the expected fertiliser strategy, is the latest example of a systemic shift from market-led globalisation to state-managed resilience, where the state (in this case, the collective member states of the EU) is a key economic actor in advancing industrial policy.

This is not just an EU story. Europe’s response is unfolding alongside the U.S. model of subsidised industrial renewal and China’s state-directed industrial-tech push, so in today’s international political economy, it is increasingly the case that markets are no longer the sole allocators of capital.

In such an environment, policy is becoming more interventionist, sector-specific, and strategic. That suggests that regulatory risk becomes as important as market risk.

We should expect more expansion of subsidies, localisation mandates, strategic sectors and a blurring of public and private investment decisions. Businesses must align with policy priorities to access capital and support. Meanwhile, equity investors should track who will be the beneficiaries of such policies.

What I am Reading

Doom Loop. The book I am currently reading with my early-morning coffee these days is Eswar Prasad’s Doom Loop. This is exactly the kind of book that resonates with the intentions of this newsletter. It argues that economic conditions, domestic politics, and geopolitical rivalries have become so deeply intertwined that they now feed destructively off one another. The result is a doom loop in which the forces we once relied upon to underpin stability are instead driving fragmentation and disorder. The Doom Loop – Eswar S. Prasad

Havel’s Greengrocer. Robert Lightizer, writing in Foreign Affairs from an American perspective, argues that Canadian PM Mark Carney, casting himself as Havel’s greengrocer at the World Economic Forum this year, got it the wrong way around. Instead, it was Trump who called foul on the prevailing economic order a decade ago. The era of hyper‑globalisation hollowed out the U.S. economy while enriching surplus countries, and in Lightizer’s view, Donald Trump’s trade agenda marks the first serious correction to this imbalance. It is a coherent articulation of a more protectionist U.S. trade order that Europeans should not ignore. Bob Lighthizer: The New Trade Order

Dollar Status. David Lubin at Chatham House argues that the conflict in Iran does not seem to have undermined the dollar’s international standing. However, this may be because the US, as the top producer of oil, gas and armaments, is economically insulated from the fallout. Dollar dominance is surviving the Iran war – just about | Chatham House – International Affairs Think Tank

One Last Thing

China’s Humanoid Robot Beats Human Half‑Marathon World‑Record Time

This week, an autonomous humanoid robot from Chinese tech company Honor completed a robot half-marathon race in Beijing in 50 minutes and 26 seconds, faster than the human world record. The race, where 40% of the robots navigated the course autonomously, while the others were remotely controlled, showcased advances in AI‑driven autonomy, energy efficiency, and mechanical design.

The event signals a new frontier for robotics, with potential applications in logistics, manufacturing, and elderly care, and underscores China’s rapid progress in AI and robotics, a sector now central to US‑China strategic competition.

Politically and economically, this event is a symbol of a shifting productivity frontier where China is increasingly the theatre where the most visible, high‑stakes experiments in bipedal embodied AI are being staged. Europe has made some advances in the area of AI, but it must decide whether to treat this as a wake‑up call for its industrial, AI, and robotics policy, and for its broader project of strategic autonomy in the context of US‑China technological rivalry.

For tech sceptics, it also raises questions about the ethical and economic implications of human‑like robots, and what that could mean for the workforce and society more broadly. AP News China Xinhua News on X

As always, thoughts shared here are intended for discussion and knowledge only, not financial, investment, or legal advice. Always chat with your advisors first.

Horizon is a strategic briefing that tracks the political, economic, and business signals reshaping the international system, every Saturday morning (CET).

In this edition: Key signals of the week; system insights; what I am reading; and one last thing.

Key Signals

More Talks Expected After US Enforces Blockade on Iranian Ports Amid Hormuz Crisis

This week, the United States military said it had activated a targeted blockade of Iranian ports and coastal waters, a dramatic escalation in the almost 2-month old US-Israel conflict with Iran, which began on February 28.

• The move came after inconclusive peace talks in Islamabad last week.

• Vice President JD Vance, who led the US delegation, said the negotiations failed because Iran would not provide an “affirmative commitment” that it would not seek a nuclear weapon or the tools to achieve one quickly.

• Oil prices rose sharply after the US military said it would implement a shipping blockade.

• On Friday, Iran’s Foreign Minister, Seyed Abbas Araghchi, said “the passage for all commercial vessels through Strait of Hormuz is declared completely open for the remaining period of ceasefire, on the coordinated route”, after an Israel-Lebanon cease-fire agreement.

• Oil prices dropped significantly, and stock markets in the US and Europe rose.

• However, President Trump said the US blockade would continue.

• In response, Iran’s top negotiator and parliament speaker, Mohammad Bagher Ghalibaf, said that “with the continuation of the blockade, the Strait of Hormuz will not remain open”.

• Meanwhile, it was reported by Axios that the U.S. and Iran were negotiating over a three-page plan to end the war. According to their sources, the U.S. was considering a $20 billion cash-for-uranium deal with Iran.

• New peace talks are reported to be possible for this weekend.

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Why this matters: The Strait of Hormuz is the world’s single most important energy chokepoint. The IEA had recently described the impact of the disruption to oil and gas flows through the Strait as "the greatest threat to global energy security in history".

• About 20% of global oil supplies and significant LNG volumes passed through the waterway before the conflict began.

• With the current ceasefire nearing its end, the clock ticked in a very literal sense for global energy markets.

• However, the prospect of new peace talks opens up the possibility of an extension to the ceasefire or a final agreement to end the conflict.

Key details:

• The blockade took effect on Monday, 13 April at 10 a.m. ET.

• It will not impede freedom of navigation for vessels transiting the Strait of Hormuz to and from non-Iranian ports, according to the US Central Command.

• Iran’s military warned that no port in the Persian Gulf or the Sea of Oman would remain secure if Iranian ports are targeted, according to Iranian Press TV.

• This US move countered Iran’s initial closure of the Strait since late February, and its tollbooth scheme, which reportedly charged some shipping companies a $2 million fee to guarantee safe passage.

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Horizon is a strategic briefing that tracks the political, economic, and business signals reshaping the international system, and how they impact strategy, leadership, and wealth, every Saturday morning (CET).

In this edition: Key signals; systemic insights on their impact; what I’m reading; one last thing.

Key Signals

A Fragile Pause

One of the biggest focus areas for the international political economy right now is the ongoing US-Israel-Iran conflict in the Middle East and its impact on the global economy (more on that below). The single most consequential geopolitical event of the week was the last-hour agreement towards a temporary pause in hostilities.

• US President Donald Trump had demanded that Iran open the Strait by Tuesday, 8 p.m. ET, threatening to decimate bridges and power plants in Iran if it didn’t.

• Iran agreed to the temporary ceasefire within hours of that deadline and to allow safe passage through the Strait of Hormuz during the two weeks.

Why this matters: The now six-week-old US-Israeli conflict with Iran, which began in late February, has triggered what the International Energy Agency has characterised as the “largest supply disruption in the history of the global oil market”.

• The conflict has already exposed how quickly a chokepoint like the Strait of Hormuz can transmit geopolitical risk into global energy, shipping, inflation, and asset prices more broadly.

• There have been immediate consequences for oil, LNG, shipping, inflation, and asset prices, which remain the case. The latest ceasefire developments have only temporarily moved the situation from one of acute panic to, at best, unstable containment.

• In addition to oil, this conflict has also significantly impacted global LNG and regional gas supply chains. European gas storage has already been reported as low for the season, with some estimates and scenarios pointing to end-of-winter levels around 30% or slightly below, depending on weather and supply conditions. The impact of the conflict complicates the task of creating a buffer for next winter.

• Oil and gas prices are likely to remain elevated above pre-war levels as governments around the world are expected to hoard and restock. This is likely to remain the case in the coming months, even if talks scheduled for this weekend in Islamabad prove encouraging. A renewed conflict will only increase supply uncertainty and price volatility in the weeks ahead.

Key details:

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The Horizon is a strategic briefing that tracks the political, economic, and business signals reshaping the international system, and how they impact strategy, leadership, and wealth, every Saturday morning (CET).

In this edition: Key signals; systemic insights on their impact; what I’m reading; one last thing.

Key Signals

Iran War and the Strait (Jacket) of Hormuz

This week, the escalation of the war in Iran continued the de facto closure of the Strait of Hormuz, through which 20% of the world’s oil and gas typically flows.

• With few tankers able to get through, these Iranian-imposed restrictions on a key point in the global energy market are acting like a straitjacket on global trade.

• The conflict, now in its fifth week, is increasingly disrupting global energy supplies, sending oil prices soaring above $100 per barrel (hitting $119 a barrel (Brent) at one point this week), and triggering emergency responses from governments and central banks worldwide.

Why it matters: The crisis, in real time, continues to expose the fragility of globalised energy markets and forces a reckoning with the geopolitical risks embedded in supply chains.

• The Strait of Hormuz blockade is undoubtedly an energy shock, but it is also a stress test for the entire international economy.

• Businesses, investors, and policymakers must now confront the reality that geopolitical chokepoints can overnight disrupt trade, inflation, and economic growth, forcing a rethink of energy security and supply chain resilience strategies.

• Even if the war ended today, perceived risks to energy supplies from this critical region will likely remain embedded in higher prices.

Key details

• Volatile oil prices hit well above $100/barrel this week as expected Eurozone inflation rose to 2.5% in March (from 1.9% in February) and German inflation hit 2.8% in the EU’s largest economy, according to a flash estimate from Eurostat.

• Uncertainty is also causing wild swings in stock markets, which have rallied and then declined in reaction to headline news about the conflict, while the risk of higher inflation due to the surge in oil prices has caused a sell-off in bonds.

• The average price for a gallon of regular gasoline in the US broke the $4 mark this week for the first time since August 2022.

• In Asia, authorities in China, the Philippines, Thailand, Vietnam, Myanmar, and even Russia have reportedly introduced emergency measures in an effort to preserve fuel supplies.

• The EU’s Energy Commissioner reportedly urged Europeans to work from home, drive and fly less, on the prospect of a prolonged energy crisis.

• President Trump’s address to the nation on Wednesday evening did little to calm market volatility as investors and traders came to terms with the reality that the war is going ​to take at least another two to three weeks. Oil prices jumped again following the address (West Texas climbed by about 7%, Brent crude by almost 8%).

Eurostat AP Reuters Reuters+1 Oil Price WSJ MarketWatch Politico Al Jazeera

Mistral’s $830M Debt Raise Signals Europe’s Sovereign Compute Bet

Early this week, it was reported that French AI startup Mistral had secured $830 million (€720 million) debt financing from a consortium of seven global banks to build its largest AI data centre near Paris.

• The facility, expected to be equipped with 13,800 Nvidia GPUs, is set to open in Q2 2026 and represents Europe’s most ambitious attempt yet in the global AI race, which has so far been largely defined by US dominance in AI infrastructure.

• This development underscores the continent’s determination to achieve technological sovereignty as AI compute is increasingly seen as critical infrastructure.

• Still, it underscores the financial and energy risks of playing catch-up, and the chips are American rather than European-made.

Why it matters: AI compute is now a critical infrastructure like energy or ports. Mistral’s round of debt raising is a pivotal moment for European tech, proving the region can also mobilise the capital needed for large-scale AI infrastructure.

• It brings more competition to the AI race. However, the deal also highlights the urgency and fragility of Europe’s position: it must scale fast to compete with the US and China, but also faces energy constraints, talent shortages, and debt sustainability challenges that could limit its ambitions.

• France’s nuclear-heavy grid provides a clear edge for AI expansion, given data centres’ massive, continuous electricity needs.

Key details

• The $830M (€720M) debt package, involving up to seven French and global banks including BNP Paribas, Crédit Agricole, and HSBC, will fund a 44MW data centre in Bruyères-le-Châtel, on the outskirts of Paris, which is set to open in Q2 2026.

• It follows last year’s €1.7 billion ($1.95 billion) equity round, led by Dutch semiconductor equipment maker ASML.

• Mistral is reported to be planning to secure 200MW of total compute capacity across Europe by the end of 2027.

• Earlier this year, the company announced an investment of €1.2 billion ($1.38 billion) for the creation of a giant (23MW) data centre in Sweden.

• Mistral’s valuation was recently reported to be €11.7 billion ($13.47 billion), with revenue projected to hit $1 billion ($860 million) by year-end after signing major contracts in the private and public sectors.

• Mistral is reported to be pursuing a strategy of crafting bespoke AI for its client base.

• The centre in Paris will serve European governments and enterprises seeking “sovereign AI” alternatives to US cloud providers, particularly as European companies subject to legislation such as GDPR and the EU AI Act increasingly prefer AI providers that align with these requirements and keep their data within Europe.

• This announcement underscores growing investor confidence in European AI.

(1.00 USD = 0.86846041 EUR 04/04/26)

Reuters Mistral AI on LinkedIn Le Figaro Le Figaro+1 Le Monde Tech Insider Tech Story XE

The Human Cost of the AI Gold Rush

The other side of the AI story is the creative destruction taking place in the labour market.

• Earlier this week, it was reported that Oracle had begun the process of laying off thousands of employees (reported to be up to 30,000 employees according to investment analysts, e.g. TD Cowen), roughly 18% of its global workforce, via pre-dawn emails, apparently without prior warning.

• While the company is yet to confirm publicly how many jobs were cut, they could rank among the largest in tech history.

• The move reflects a brutal but increasingly common trade-off: redirect resources from payroll to AI capex.E

Why it matters: News of Oracle’s layoffs is a harbinger of the AI era’s impact on white-collar jobs. They signal that even profitable, established firms are willing to make drastic workforce reductions to fund AI transitions, a trend that will likely accelerate across tech and beyond.

• For businesses, this raises urgent questions about talent retention, reputational risk, and the ethical implications of AI-driven displacement.

• For policymakers, it signals the need for measures to manage AI disruption to workers in labour markets (their concern is that workers, who, unlike algorithms, vote and shape policy via elections).

Key details

• The layoffs are reported to include several countries, including the US, Canada, Mexico and India, with some specifically targeting roles Oracle expects AI to make redundant.

• Some estimates suggest they could free up $8–10 billion annually to fund Oracle’s $40 to $50 billion AI data centre expansion.

• Shares in the company were reportedly depressed in recent months but rose after the news of the layoffs.

• Last year, Oracle teamed up with OpenAI, Japanese conglomerate SoftBank, and others to launch the Stargate project at the White House, to build data centres for AI in the US, which was reported at the time to spend $500 billion into the venture over the next four years, aspiring to create hundreds of thousands of jobs.

• Oracle’s layoffs this week are just the latest in a string of big tech layoffs in recent times that have reportedly included Amazon, Salesforce, and Meta, among others.

CNBC WSJ The Next Web LA Times TechCrunch Inc

System Insights

Geopolitical Fragmentation: The Iran war and the Strait of Hormuz blockade should not be viewed in isolation; in systemic terms, they are symptoms of a broader unravelling of the post-Cold War order. This conflict is accelerating the fragmentation of global trade, energy, and data flows, with great powers and regional blocs increasingly setting their own rules.

• Businesses hear a lot about geopolitical risk at the moment. They must now operate in a “multi-aligned” world, where supply chains, data storage, and even talent pipelines are being regionalised for security.

What happens next: A ceasefire in the Middle East could ease oil prices, but structural supply chain vulnerabilities will likely persist. A continuation of the war will likely have the opposite effect.

• Further escalation, widening of the war, cyberattacks on energy infrastructure, or all three, could trigger another oil spike and deeper market volatility.

Geopolitics Shifts the Energy Transition: The Iran war is also exposing the fragility of the global energy system and highlighting how vulnerable large parts of the global economy are to Middle East energy.

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In this edition: Key signals of the week; systemic insights; what I am reading; and one last thing.

Top Signal: The Rolling-Day Freeze and the Prospect of $150 Oil

The most critical geopolitical signal this week comes from the ongoing fragile intersection of geopolitics and energy markets in the Middle East, via social media. Last weekend, (while the main financial markets were closed), US President Trump escalated matters by threatening Iran on his social media platform:

“If Iran doesn’t FULLY OPEN, WITHOUT THREAT, the Strait of Hormuz, within 48 HOURS from this exact point in time, the United States of America will hit and obliterate their various POWER PLANTS, STARTING WITH THE BIGGEST ONE FIRST!…”

However, he reversed course on Monday by signalling that he would temporarily hold off on his threat of strikes against Iranian energy infrastructure for five days, citing:

“…VERY GOOD AND PRODUCTIVE CONVERSATIONS REGARDING A COMPLETE AND TOTAL RESOLUTION OF OUR HOSTILITIES IN THE MIDDLE EAST…”

However, during this five-day freeze, there were also reports of a buildup of US troops towards the region, with the Pentagon reportedly preparing to deploy thousands of troops from the Army’s 82nd Airborne Division, in addition to the thousands of Marines already en route. What they will do when they get there and what that means for the length of this conflict remains to be determined. This riding of both horses, receptiveness to talks while reinforcing military deployment, is a classic mix of hard‑power signalling plus diplomatic window‑dressing.

Meanwhile, initial reports out of Iran this week suggest they were not actually in negotiations, with officials there painting the US President’s announcement as “backing down” in a potentially face-saving move. During the week, the Iranian foreign minister, Abbas Araqchi, was reported to have said that his country was reviewing a U.S. proposal to end hostilities but still had no intention of holding talks. However, he also reportedly confirmed this week that indirect communications had been exchanged through intermediaries. The theatre of how all this plays out to the world matters to both sides, because domestic audiences and regional allies are watching the performance as much as the substance.

The disruption to the supply of oil and gas is the key concern for business, but also for markets, which initially reacted positively to the reprieve. However, as the week went on, it was still unclear what would happen this weekend (and at the opening bell on Monday) if no agreement was in place by the time this latest US ultimatum expired. However, on Thursday, with the war still ongoing, President Trump rolled over his deadline for Iran to open the Strait of Hormuz again by another 10 days (to Monday, 6 April, 8 P.M., ET), citing ongoing talks with Iran that are “going very well”.

It remains a very volatile situation, and as a result, markets are also likely to remain volatile. The underlying signal is that the situation is erratic and highly uncertain, which is surely stretching investment managers’ resilience. What matters most for the global economy is who will ultimately control the Strait of Hormuz and on what terms passage will be allowed. Who will control Iranian oil is also a significant factor.

Interestingly, in a signal of what the marketplace thinks the stakes could be for the global economy, Larry Fink, the CEO of BlackRock, the world’s largest asset manager, speaking with the BBC on Wednesday, framed the stakes clearly: he warned that a scenario where there is a failure to secure a durable de‑escalation could allow prices to climb toward $150 per barrel (for years), risking a global recession. Painting such a scenario is sure to raise an eyebrow in central banks and within credit markets. One can see how that happens once we layer on higher insurance costs, extra buffer capacity, rerouting deliveries, and a darker sentiment in credit and equity markets.

In another scenario, where Iran becomes a country that participates in the world again and is accepted by the international community, he said, one could paint a picture of oil prices being lower than the start of the conflict over three weeks ago.

What we have seen play out this week is a situation where the U.S. reserves the right to use social media to set energy‑security deadlines for the Iranian regime, while financial markets must live with the resulting ‘on‑off’ risk of a major supply shock. President Trump on Truth Social, President Trump on Truth Social+1, President Trump on Truth Social+2, The Hill, Reuters, Politico, BBC Audio, The Guardian

Key Signals

EU and Australia Free Trade and Security Agreement

After 8 years of negotiations, Australia and the European Union struck what has been described as a landmark trade deal this week that will lead to both sides reducing tariffs on most products and services to zero and expanding trade across a wide range of areas, including machinery, motor vehicles, chemicals, financial services, food and wine, education, and critical raw materials.

It is another win for the idea of an open (if bounded) and rules-based approach to international trade (despite protests in parts of the EU over Mercosur and other deals), and it follows the EU’s recent finalisation of free trade agreement negotiations with Indonesia (September 2025) and India (January 2026) in the strategically important Indo-Pacific region. The EU trade agreement with South America’s Mercosur bloc of countries was also agreed earlier this year. Australia, in recent years, has also signed free trade agreements with the UAE, the UK, and a Regional Comprehensive Economic Partnership Agreement with 14 other Indo-Pacific countries. This week’s agreement supports both sides’ ambition to diversify trade, de-risk supply chains, bolster competitiveness, and strengthen certainty and resilience against economic and geopolitical shocks in an increasingly volatile international trade environment.

The EU and Australia already have a strong trade relationship, with over €89.2 billion in goods and services traded annually, and this is expected to grow significantly. The EU expects annual exports to Australia to increase by 33% over the next decade, resulting in an expected €4b increase to EU GDP by 2030. Australian companies, service providers, and farmers will see most of their exports enter the EU tariff-free. However, some volume restrictions will apply to certain agricultural products (such as red meat) and protected geographical indications, which Australian farmers are “extremely disappointed” about (It is worth remembering that it was agricultural concerns on the Australian side that reportedly collapsed the prospect of agreement back in 2023).

Collectively, the EU is the larger party to the agreement, being among the world’s biggest economies, with around 450 million people. This brings opportunity for Australian companies, who are expected to have better access to bid for lucrative European government contracts under this agreement. Meanwhile, Australia is a major producer of aluminium, lithium, and manganese, which are all essential imports for the EU as it seeks to diversify its supply chain and ensure continuity for its identified strategic industries, such as electric vehicles, battery production, and renewable energy. It also hopes to gain immediate benefit from exporting more cars, machinery, and chemicals from day one, as their price is expected to fall for Australians down under.

In a strengthening of the relationship beyond just trade, both sides this week also agreed to increase military cooperation, including deepening cooperation across joint maritime exercises, space, the defence industry, and countering hybrid threats. These underscore growing Europe-Indo-Pacific security linkages and should also complement Australia’s AUKUS collaboration without overlap.

Moreover, formal negotiations have also been announced for the association of Australia with Horizon Europe, the world’s largest funding programme for research and innovation, which could lead to even closer tie-ups between the two economies.

Here is some of what leaders from both sides said in Canberra, Australia, this week:

“This deal creates major new opportunities for Australian exporters in the European Union’s massive $30 trillion economy, and will reduce costs for Australian consumers.”

– Australian Prime Minister Anthony Albanese

“The EU and Australia may be geographically far apart but we couldn’t be closer in terms of how we see the world. With these dynamic new partnerships on security and defence, as well as trade, we are moving even closer together. These agreements put in place lasting, trust-based structures to support peace and security through strength…”

- European Commission President Ursula von der Leyen

The negotiated draft texts are expected to be published soon, before then going through the necessary internal procedures on both sides, ahead of the eventual signing and conclusion of the agreement if all goes to plan. EU Commission, EU Commission+1, Prime Minister of Australia, Australian Dept. Foreign Affairs & Trade, UVL on X, ABC News, National Farmers Federation, The Guardian, Trade Agreement Factsheet (EU)

Google’s “TurboQuant” Signals an Evolution in the Efficiency War

This week, Google Research unveiled TurboQuant, a breakthrough AI memory compression technology that is being hailed by some as the industry’s “Pied Piper” moment (after the fictional algorithm from HBO’s Silicon Valley TV series).

The company says that this technology reduces the working memory that is required for Large Language Models (LLMs) by at least 6x without sacrificing performance. This is a massive tech signal as it challenges the contemporary narrative that AI growth is strictly bound by the supply of high-end chips.

By making AI significantly cheaper to run on existing hardware, Google is shifting the competitive advantage from “who has the most silicon” to “who has the most efficient architecture.”

The AI race has been a key feature of the international political economy in recent years, particularly the rivalry between the US and China. While Google’s innovation here is yet to be deployed in the real world, it does resemble a new “Deepseek” moment in the evolution of AI. It is a signal that the rules of the AI‑driven economy are also being rewritten by the hidden architecture of memory and inference. In that context, efficiency itself is emerging as a new axis of competitive and geopolitical power.

While this innovation could mean less need for advanced chips, it is a rapidly evolving sector, so there is also the possibility that it leads to stronger demand for hardware as AI possibilities then increase further, with the potential to open up new workloads and longer‑context deployments. Google Research, CNBC, CXO Digital Pulse

System Insights

This week’s signals are transmitted from an international system that is being rewritten in real time.

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Top Signal: Middle East Escalation Further Disrupts Energy Markets

This week, in a signal that geopolitical conflict is overtaking economic conditions as the primary driver, the ongoing situation in the Middle East (now entering week three) escalated sharply, with new attacks on energy infrastructure across Iran, Qatar, Saudi Arabia, and Kuwait, prolonging the de facto disruption of the Strait of Hormuz.

In a major escalation, in what officials and media reports attribute to an Israeli strike on the Iranian sector of the South Pars gas field in the Persian Gulf, the world’s largest natural gas deposit, was followed by Iranian ​missile attacks on its Gulf neighbours, including the Qatari industrial hub, Ras Laffan, ​causing what has been described as “extensive damage” to its ⁠core LNG plants (which are amongst the world’s largest).

Afterwards, the US President Donald Trump threatened to “blow up” the South Pars gas field if the Iranians continued their attacks on Qatar. In a post on his Truth Social platform, the US president also posted:

“I do not want to authorize this level of violence and destruction because of the long-term implications that it will have on the future of Iran, but if Qatar’s LNG is again attacked, I will not hesitate to do so”

Saudi Arabia is reported to have also signalled a willingness to respond militarily against Iran if necessary.

The immediate effect of this week’s escalation was visible: oil surged to about $119 (Brent) per barrel at one point, and global oil and LNG flows from the Strait of Hormuz region, which normally carries about 20% of global oil trade, have seen significant disruptions as shipping routes became unsafe and insurance premiums soared.

The impact of these developments in the Middle East was visible in Europe, where gas prices subsequently soared to three-year highs. Prices at the service station continued to increase, particularly in member states such as Germany, the Netherlands, Denmark, and Finland.

In a signal that the US administration is becoming more concerned about the impact of rising prices, Treasury Secretary Scott Bessent signalled that the U.S. is considering waivers that would allow sales of sanctioned Iranian oil already at sea, echoing last week’s decision to grant temporary exemptions for certain Russian cargos. However, he ruled out intervening in the oil futures markets.

In addition to energy infrastructure, tanker traffic in the Middle East has been directly targeted, with vessels described as “sitting ducks” amid widening attacks, and naval protection, for now, proving slow and uncertain in the strait’s narrow shipping lanes.

This conflict has grown legs and is now exerting systemic pressure on global trade infrastructure and energy flows, with key chokepoints and hubs under sustained threat. Even alternative routes such as Saudi exports via the Red Sea are now under pressure, with drone attacks reported in the region.

For Europe, Asia, and the wider global economy, this is translating into immediate second-order effects with rising energy costs, supply chain instability, and inflationary pressure. The magnitude and persistence of that inflationary pressure remain highly uncertain and will depend heavily on the duration of the supply disruption and market expectations. Reuters CNN President Trump on Truth Social WSJ Fox Business Euronews

Key Signals

Central Banks Hold the Line Amid Uncertainty

In both Europe and the United States, the European Central Bank, the Bank of England, and the Federal Reserve maintained their cautious stance this week by leaving interest rates unchanged, signalling a “higher-for-longer” narrative in an economic environment of increasing uncertainty. Given the tone of this week’s policy decisions, expectations of rate reductions (or at least, the amount of them) should be pushed out further.

Monetary policymakers are increasingly acknowledging downside risks to growth, while inflation remains sticky. European economic data continues to soften. The rise in energy prices caused by the ongoing war in the Middle East is a driver in the ECB’s revised downward growth projections and upward revision of its inflation projections (beyond its 2% target) for 2026. Developments in the Middle East were also a cause for concern for the Bank of England, which signalled an expectation that CPI inflation could now be higher as a result of the energy shock.

Meanwhile, U.S. signals are mixed; economic activity has been expanding at a solid pace, but job gains have remained low, and inflation remains somewhat elevated. The implications of the ongoing developments in the Middle East for the U.S. economy are also a stated cause for concern for the Fed in fulfilling its dual mandate. The coming weeks will provide more visibility.

These geopolitical-driven macro disruptions create a policy tension: cut too early and risk inflation credibility; wait too long and risk economic slowdown.

Markets are beginning to sense this tension.

Read more

Many of us who are involved in supply chain decisions, or invest in businesses that do, will no doubt have been paying attention to the Strait of Hormuz crisis currently underway amid the US/Israel-Iran war in the Middle East, which has played havoc with oil and gas prices in the market and delivery times for businesses, since it broke out in late February. Blockages are a major problem because, these days, roughly one-fifth of the world’s oil flows through this region.

When we talk about the “market,” such as the stock market, it can often feel like we are speaking about an independent natural force, as if we were talking about the weather or gravity. However, as the events in the Middle East continue to unfold, it becomes more obvious that when we look at the market through a political economy lens, what we are really dealing with here is the politics–markets nexus, a system shaped by different social constructs and changing power dynamics.

Markets and the political economy are structurally interdependent:

• Markets are what we see most clearly because they provide the mechanism for exchange. But business training has led many of us to expect that economic efficiency, open markets, and institutional authority are still the order of the day.

• However, it is the power plays, laws, and norms within the political economy that provide the “operating system” that enables those market exchanges.

Together, the marketplace and the wider political economy form a co-evolutionary loop within a single complex adaptive system.

Observable system dynamics amplify this interplay. For example, market success generates wealth, which the financial winners often deploy to lobby politicians toward their preferred market policies (e.g., generous subsidies, tax breaks, or tariffs). This, in turn, just entrenches their dominance in a reinforcing feedback loop, which some call the “swamp” that needs drainage.

Yet politics is also a force for good, acting as a balancing force. When market extremes emerge (which they are periodically prone to do), those that generated much of the success (say, tech monopolies or those benefiting from lax regulation or an environmental free pass) face the wrath of legislatures that respond with antitrust laws, fines, or carbon taxes to restore social equilibrium (though often with delay).

So, given these types of phenomena, if we are active participants in the marketplace, we clearly need more substantive information than just historical performance data.

We need to pay attention to what is happening within the wider political economy, because it is there that the laws, regulations, budgetary decisions, sanctions, and indeed the big decisions about war and peace are set, all of which can impact the value of investments from bonds to currencies, and individual share performance.

From pension funds to sovereign wealth funds, understanding the politics–markets nexus through a political economy lens is fundamental knowledge for business growth and managing wealth. Yet, while it would be expected that sovereign wealth funds consider political risk in their portfolios (given that they are created to help solve future political/economic problems), there are investment mandates, particularly in the private sector, that still don’t (I was on a conference call a few weeks ago, as the US Navy was reported as heading towards the Gulf, and the investment analyst presenting his firms outlook questioned if geopolitics really mattered for markets). Politics matters because of the short-term volatility it triggers and the long-term structural change that it leads to.

The political economy is where political institutions (such as governments, courts, and regulatory bodies) interact with economics and shape outcomes. The nature of this interaction pretty much determines the relative levels of high-trust or low-trust within markets.

For example, you cannot have a market for intellectual property (IP) if the political economy doesn’t enforce patents. You cannot have a rules-based trade regime if one or more of its architects are among the first to break the rules. So, businesses and, naturally, their investors, value stability over volatility or chaos.

When you think about it, a market transaction is, after all, just a socially constructed promise. The political economy that market investors operate in provides the “referee” (the agreed legal system) that ensures those promises are kept. Moreover, the strength of that system is what determines which promises can be kept.

A strong political economy of reliable institutions and norms should be expected to reduce friction in the marketplace. But a weak one, riddled with corruption or bureaucracy, tends to act like a burdensome “tax” on market actions. These domestic dynamics scale internationally.

Geopolitics sits at the heart of international political economy because of its power-oriented dimension. It’s geopolitical issues about geography, state rivalry, and security intersect with economic systems that shape global rules, trade, and the flows of natural resources.

Originating within international relations, it is a lens that studies the interplay of geography and politics in the anarchical global space. It helps answer questions about the risks posed by how territorial control, alliances, and security threats (e.g., wars, borders) influence economic outcomes, such as sanctions or supply chains, often pursued via “geoeconomics” where economic tools such as tariffs and export controls are used for geopolitical ends.

Today, geopolitics sets the macro guardrails for business and the markets their investors trade in. In many ways, the international game of geopolitics is rewriting the rules for business strategy and investor wealth through co-evolutionary loops with domestic politics. Non-state actors (e.g., multinational corporations and global financial institutions) are also increasing their influence. Understanding what is at play puts us in a better position to anticipate and mitigate its impact.

What Can Businesses and Investors Do?

So, how can we build these considerations into our decision-making when participating in the marketplace?

Well, for strategists across business, understanding the politics–markets nexus through a political economy lens is the difference between playing 2D chess and 3D chess. We can no longer win on “product” and “price” alone if the actual “rules of the game” are shifting.

In the first instance, to even know that rules are changing, we need

Read more

Top Signal: The Global Energy System Continues to Rattle

The dominant signal in the global economy this week was the growing impact of the escalation of the conflict involving Iran and the disruption of shipping through the Strait of Hormuz, one of the world’s most important energy chokepoints that facilitates roughly 20% of global oil supply (and a significant amount of the global LNG trade). The impact of the crisis has already been described as one of the worst supply shocks to energy markets since the 1970s.

Over the past few days, the global energy system (and customers at service stations) continued to confront oil prices that surged well above and then continued to oscillate around the $100 per barrel mark after Iranian attacks on tankers and energy infrastructure across the Gulf. Markets don’t like uncertainty and thus reacted quickly this week: Asian equities dropped, and European markets weakened as investors reassessed inflation risks.

To stabilise markets, the International Energy Agency this week announced the largest strategic oil release in history, some 400 million barrels, following an extraordinary meeting of IEA Member governments.

Here is the IEA Executive Director Fatih Birol:

“The oil market challenges we are facing are unprecedented in scale, therefore I am very glad that IEA Member countries have responded with an emergency collective action of unprecedented size…”

However, even this unprecedented action may only cushion the shock rather than resolve it, as the Strait remains severely disrupted and OPEC members around the region are reported to be forced to curtail exports as infrastructure and shipping routes are disrupted. Moreover, in logistical terms, this strategic release by IEA members will also take some time to deliver to the market, suggesting that prices could remain elevated and deliveries will continue to be delayed. The release is best seen as a bridge, not a solution.

This matters because energy is a system input, not just a traded commodity. When the energy system is disrupted, costs ripple through manufacturing, transport, food production, and ultimately consumer prices.

The question right now is: how long is this crisis going to last? History shows that it is easier to start wars than end them. It was reported this week that Iran’s new president wants reparations to end the conflict; meanwhile, the number of attacks on container ships within the region has increased as Iran warned the world to get ready for $200 a barrel oil. This could last a while.

For businesses, particularly in Europe and Asia, the implications are particularly acute. Most of the oil from the region goes to Asia. Meanwhile, Europe had only recently stabilised its energy situation after the Russia-Ukraine disruption; the continent can probably absorb the current shock, but not for too long. While the US economy is more self-sufficient in terms of oil, the war in the Middle East still has an economic impact.

Elevated geopolitical risk impacts business in different ways, including hiring and capital expenditure; it can also affect the economy more broadly. Wars have a tendency to be inflationary over time as supply shocks tend to drive price increases. Reported new research from one major US investment bank this week forecasted US inflation ticking up to 2.9% in December (the target for the Fed is 2%). Meanwhile, GDP is expected to be 2.2% in the fourth quarter. However, at this point, we don’t know the full impact this war will have (many investment houses now expect the Fed to hold rates steady at next week’s meeting).

In short, the geopolitical risk premium has returned to the energy system. We may be in for a bumpy ride. IEA WSJ MarketWatch Barrons Irish Examiner The Hill WP

Key Signals

Risk of Stagflation is Back on the Policy Agenda

As energy prices jumped, economists have begun openly discussing a negative scenario that policymakers had probably hoped was well behind them and consigned to economic history: stagflation.

Brent crude pushing north of $100 a barrel has already started feeding into inflation expectations, while growth indicators remain fragile. This week, analysts, central banks, and prominent economists (such as Nobel laureate Joseph Stiglitz) were reported to be increasingly worried about a combination of rising prices and slowing economic momentum, which is the hallmark of stagflation.

In Europe, reports of several prominent German economic research institutes lowering 2026 growth forecasts due to the Middle East conflict’s impact on energy prices are indicative of the current economic environment.

Here’s the dilemma.

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Culture is often treated as the soft side of organisational and societal life, important, perhaps, but secondary to strategy, structure, and resources.

This episode challenges that assumption. Culture and power are locked in a constant negotiation, drawing on ideas from political science, political economy, and management practice. This episode sets out what it actually takes to shift culture in a way that lasts.

And that matters now more than ever, because whether we are talking about transforming an organisation, responding to the climate crisis, or thinking carefully about who we elect and what they can realistically change, understanding the relationship between power and culture may be one of the most important questions of our time.

Top Signal: Iran War Signals Ever-Present Energy Geopolitics

This week, the escalating war involving Iran, with joint US and Israeli strikes since last Saturday and Iranian threats around the Strait of Hormuz, has pushed global benchmark Brent crude oil prices above roughly the $80-a-barrel mark with intraday spikes even above that level, and analysts are now openly discussing scenarios of $100+ if the disruption persists.

The core risk here is not just the price, but also the potential for extended interruptions to supply through the Strait of Hormuz, a key chokepoint which separates the Persian Gulf and the Gulf of Oman, and through which one-fifth of the world’s oil is reported to flow by tanker. Gas supplies from the region have also been disrupted. Qatar’s liquefied natural gas production (which reportedly includes the world’s largest LNG plant and is the world’s second largest LNG exporter after the US) announced a temporary halt in production this week following Iranian attacks, sending prices soaring. Stock markets also experienced heightened volatility, as airlines and the tourist industry in the region also faced significant disruption.

This week’s developments, in many ways a throwback to an earlier era of geopolitical volatility, are a textbook case of how hard power eruptions can travel quickly through markets and then into business and consumer prices, especially in those countries exposed to fuel costs. (I, for one, witnessed queues at the service station this week as news filtered through about the potential for higher fuel prices. Prices were up over 20 cents (€) a litre the following morning.) The average price of a gallon of gas in the US was reported at about $3.25 on Thursday.

Earlier this week, the US administration seemed willing to acknowledge higher domestic fuel prices to pursue its foreign‑policy objectives. Speaking in the Oval Office this week, alongside the German Chancellor, Friedrich Merz, President Trump said that:

“If we have a little high oil prices for a little while…as soon as this ends, those prices are going to drop, I believe, lower than even before.”

This underscores that, at least rhetorically, the administration is willing to trade some short-term price pain for broader strategic objectives. However, the US Secretary of the Treasury, Scott Bessent, also signalled this week that the US will make announcements about how the administration can support the oil trade in the region.

An extended disruption to energy supplies in the Middle East could amplify inflation and FX pressures, especially for more import-dependent regions such as Europe and Asia, with renewed input‑cost volatility for many sectors, especially in transport, chemicals, heavy industry, and agriculture. China is particularly vulnerable to energy supply disruption from Iran. These developments also follow the recent disruption in its supply from Venezuela. It was reported this week that Chinese authorities asked refiners to halt new fuel export contracts and cancel existing shipments.

Agile businesses with the capacity to hedge and diversify their energy sourcing are naturally better placed to navigate this current environment. Depending on how long this conflict lasts (and if it grows legs), these recent developments are also increasingly likely to focus the minds of many business decision makers on energy matters, particularly in reassessing their approach to the green transition agenda at a time when it has started to lose support in some sectors, such as the automotive industry (see last week’s edition).

However, while some firms may double down on diversification and renewables, others (depending on their location) may view this week’s developments through a security lens and lobby for more domestic fossil capacity to reduce dependence on the Middle East. Reuters Reuters+1 Politico CNBC NYT CSPAN via YouTube

Key Signals

Made in EU Industrial Policy Shift

This week, the EU Commission advanced the Industrial Accelerator Act proposal (often framed politically as part of a ‘Made in EU’ or “Made in Europe” strategy), which is a strategic industrial policy designed to strengthen Europe’s industrial base by boosting manufacturing, growing businesses, and creating more jobs within the EU.

The aim is to boost demand for low-carbon and European-made products and net-zero technologies, enable faster and simpler digital permitting, and ensure major inward foreign direct investments actually generate added value in defined strategic sectors through criteria such as technology transfers and partnerships with EU entities.

The goal is to reinforce resilience and competitiveness, and to increase the manufacturing sector’s share of EU GDP to 20% by 2035. It is a signal that the EU is pivoting from what might be described as a pure neoliberal single-market narrative and evolving toward a more geoeconomic approach that assumes elements of a “European preference “ and takes a more proactive stance to increase its economic security.

The proposal was announced last year in the Clean Industrial Deal and also delivers on the Draghi report by creating EU demand for clean “Made in EU” products and key technologies through public procurement and support schemes.

Here is the EU Executive Vice President, Prosperity and Industrial Strategy, Stéphane Séjourné (translated):

“Today, “made in Europe” is making its grand entrance into European law.

What I am presenting to you today is more than a simple change in modus operandi, it is a change in doctrine - still unthinkable only a few months ago…

Because without a strong industrial base, there is no European social model, no climate transition, no strategic autonomy.”

Such an explicitly preference‑based EU industrial policy may have seemed politically unthinkable to some until relatively recently (it is after all one of the world’s most open markets), but now arises within a changed international landscape driven by international trade disruptions, such as US trade measures, increased imports from China (such as electric vehicles), and the broader breakdown in the US-led liberal trade order that had relied on long and open international supply chains.

With this policy proposal, the EU wants to encourage greater reciprocity and more balanced economic outcomes among trade partners. It is an approach that some of its major trade partners already take. There had been reported concern earlier in the week in some quarters about how China might react to these developments (given its dominance in clean technology and potential perceptions about discrimination against Chinese clean‑tech exports and investment). On Friday, the Chinese commerce ​ministry reportedly expressed “grave concern” over ‌the proposals and will now ​closely monitor the legislation process of ​the act and its potential impact.

The policy proposal will now enter institutional negotiations with both the European Parliament and the Council of the European Union (which means it could be watered down or sharpened) before its expected adoption and entry into force. EU Commission EU Commission+1 RFI Reuters

Iceland's Government Proposes Continuing Halted EU Membership Talks

Also, this week, the Icelandic government announced that it had decided to put a motion to parliament proposing to hold a referendum on 29 August 2026 on whether the Nordic island, situated between the Arctic Ocean and the North Atlantic Ocean, should resume accession talks with the European Union.

Iceland, with a population of almost 400,000 people, had initially applied to join the EU back in 2009, in the aftermath of the financial crisis. Accession negotiations had taken place during 2010–2013 before they were halted. However, the international economic context is different today and poses new challenges and opportunities from when Iceland first applied for membership. The geopolitical environment is also significantly different in Europe, and the Arctic region is emerging as one of the most strategically important regions of the 21st century.

There is a growing list of countries that want to join the EU. However, Iceland is already allied to many EU member states through its membership of NATO. Moreover, it is already part of the European Economic Area. So, this referendum signals that the government is open to the possibility of even stronger institutional anchoring within Europe.

State media, RÚV, reported this week that recent polling suggests that there is a majority support among Icelanders for the holding of this referendum, while a poll in February, also published by the public broadcaster, reportedly suggested that the electorate was evenly divided.

Here’s what the European Commissioner for Enlargement, Marta Kos, said:

“Iceland has announced holding a referendum on whether to restart EU membership negotiations.

A significant decision now lies ahead for the Icelandic people.

Iceland is already a strong and trusted partner.

In a world that is changing fast, the European Union offers an anchor in a community of values, prosperity, and security.

Accession negotiations always reflect the specific realities of each candidate country.”

The specific reality (to borrow the Commissioners’ phrase) of an Icelandic candidature may come down to finding a compromise on sensitive areas such as its exclusive economic zone and fishing rights within it.

In announcing the decision, the government signalled a double safety mechanism for voters in its announcement this week (perhaps a lesson learned from observing the Brexit referendum experience in the UK):

“If the outcome of the proposed referendum in August is to resume negotiations, and negotiations are subsequently concluded, there will then be a second referendum putting the question to the Icelandic voter whether Iceland should, in fact, join the EU.”

If voters approve in the second referendum, then membership would give Icelanders a direct say in EU decision-making and eventually lead to the adoption of the euro currency. It would also mean a stronger European approach to developments in this Arctic region. Government of Iceland RÚV Marta Kos on X Reuters Le Monde EU Candidate Countries

System Insights

Taken together, this week’s signals offer more evidence of the ongoing change in the international system. We are increasingly moving away from an era defined primarily by economic efficiency, open markets, institutional authority, soft power, and stable energy flows toward one that is increasingly shaped by great power politics, hard power, the search for resilience, and geopolitical alignment.

The escalating confrontation in the Middle East involving Iran, Israel, and the United States (but with knock-on effects for Iran’s neighbours) is a reminder that energy remains one of the most powerful transmission channels between geopolitics and business outcomes.

The threat to the Strait of Hormuz, where roughly one-fifth of the world’s oil flows, just illustrates how a localised conflict in the Middle East can rapidly cascade into global price shocks, with the uncertainty bringing elevated market volatility due to supply disruptions. It is illustrative of

Read more

Top Signal: Trump’s 2026 State of the Union Signals Terms of Election Fight

This week, President Donald Trump delivered the first State of the Union speech of his second term (the longest such address on record, running for nearly two hours), which could have been renamed the state of the election campaign, because in many respects the speech (and the response) signalled on what terms his party and their opponents intend to fight the mid-term elections later this year.

The president placed the economy and national confidence at the centre of his message. Right from the start, he sought to contrast what he sees as the early achievements of his administration with those of the previous Democratic administration (many of which were subsequently disputed by fact-checkers in mainstream media).

Here’s some of what he said:

“The Biden administration and its allies in Congress gave us the worst inflation in the history of our country. But in 12 months, my administration has driven core inflation down to the lowest level in more than five years. And in the last three months of 2025, it was down to 1.7 percent”

“The stock market is at 53 — all-time record highs since the election. Think of that. One year. Boosting pensions, 401(k)s and retirement accounts with millions and millions of Americans. They’re all gaining. Everybody’s up, way up.”

In addition to highlighting the recent stock market performance and consumer costs as an administration success, there was also an announcement of an expanded federal retirement savings program for workers without employer plans. He reiterated the use of tariffs as a tool for revenue and competitiveness (a policy many economists say is largely borne by U.S. importers and consumers) and also suggested that, at some point, he believed tariffs could even substantially replace income tax:

“And as time goes by, I believe the tariffs, paid for by foreign countries, will, like in the past, substantially replace the modern-day system of income tax, taking a great financial burden off the people that I love.”

He pressed for energy self-sufficiency through big technology and infrastructure investment, such as the obligation to provide for their own power needs. He also reminded his audience of the executive order he recently signed to ban large Wall Street investment firms from buying up, in the thousands, single-family homes. At times, the speech seemed designed for viral moments on social media; in a year that America celebrates her 250^th birthday, the president declared:

“Our nation is back, bigger, better, richer and stronger than ever before.”

While the speech was dominated by domestic issues, the president did also signal that he would prefer a diplomatic solution to the ongoing situation with Iran:

“My preference — my preference is to solve this problem through diplomacy. But one thing is certain, I will never allow the world’s No. 1 sponsor of terror, which they are by far, to have a nuclear weapon, can’t let that happen.”

On the other side of the aisle, the House Democratic Minority Leader Hakeem Jeffries signalled how his party would approach the election, and the keyword here is affordability. He said afterwards on national television that:

“The President’s speech was riddled with dirty, rotten lies, including his unwillingness to confront the affordability crisis.”

His party was reportedly optimistic this week, as they now see a path back to power by also focusing on the economy, in particular on affordability (which Republicans have also focused on but blame on prior Democratic policies). As the former President Bill Clinton used to say, “It’s the economy, stupid”.

With the pace of change in Washington D.C. these days, the election seems like an age away, but the current Republican majority is tight, and there are only a few seats needed to flip the House in November. However, some amongst the Republicans have signalled concern that the message will not reach key swing voters. The Republican strategist Karl Rove wrote in a Wall Street Journal op-ed this week that the speech was too belligerent and sounded as out of touch, urging more empathy and economic focus to win over disenchanted independents. Transcript via NYT CNBC Hakeem Jeffries WSJ NBC News ABC News DW BBC News

Key Signals

EU Greenlights Provisional Implementation of Mercosur Trade Deal

This week, the European Commission President Ursula von der Leyen announced that the EU would proceed to provisionally implement the trade deal it signed in January (after 25 years of negotiations) with the South American Mercosur countries, despite the European Parliament previously voting to send the agreement to the European Court of Justice for review before voting on it (which could reportedly take up to two years). This significant agreement, which some have labelled as the “cows-for-cars accord”, creates a transatlantic free-trade area spanning more than 700 million people.

Here is some of what von der Leyen said this week on the decision:

“Mercosur is one of the most consequential trade agreements of the first half of this century. It is a platform for deep political engagement with partners who see the world as we do. And who believe in openness, partnership, and good faith. Partners who understand that open and rules-based trade delivers positive results for all”.

The announcement by the EU Commission this week follows news that both Argentina and Uruguay ratified the agreement on their side earlier this week. Brazil and Paraguay are expected to follow soon.

Following a lack of unity, the deal was approved by a qualified majority of member states earlier this year, with several countries, including France, Ireland, Poland, Austria, and Hungary, voting against it. To be implemented in full, it also needs approval in the European Parliament. Pushing it through on a provisional basis now could make it more difficult or easier (depending on which view you take) to get through the European Parliament later. Still, a provisional application is explicitly temporary under EU treaties.

This week’s decision to implement the agreement on a provisional basis is a clear signal that, in the Commission’s and Council’s current calculus, geoeconomic considerations such as first-mover advantage in this region prevail over other concerns. EU Commission Politico

China Shifts Crude Purchasing Patterns as OPEC+ Expected to Remain Cautious

China, the world’s largest crude importer, has reportedly adjusted its crude oil buying strategy by favouring discounted Russian and Gulf crudes (e.g., Urals and Saudi grades) while also cutting back on pricier Brent-linked West African imports, with February and March arrivals from Africa projected to be lower than late 2025 levels. Global benchmark Brent futures hit their highest level in nearly seven months this week, amid geopolitical tensions. Changes in Chinese import patterns signal a strategic decoupling from Western benchmarks and a change in freight flows and refinery margins, which in turn feed into wider global energy price dynamics that influence consumer and industrial cost bases.

Meanwhile, the OPEC+ coalition is expected to signal a cautious approach to output adjustments at its next meeting this weekend. Trading Economics Reuters Reuters +1

EV Pull Back Signals a Change of Pace in Energy Transition

This week, Stellantis, one of the world’s biggest car manufacturers, known for brands such as Peugeot, Fiat, Jeep, and Chrysler, among others, became the latest manufacturer to announce a major pullback from the drive towards all-electric car production following its announcement of an annual net loss of EUR22.3 billion. The loss was attributed primarily to a lack of sufficient customer demand for EVs and a changed marketplace, particularly in the US, where the Trump administration has cut subsidies for EVs and funding for charging infrastructure.

It is a strong signal from industry that prioritising climate change in this marketplace is bad for business. As part of its path to recovery, the company is betting on a reset based on hybrid and the return of several popular combustion-engine products (including diesel). WSJ Le Figaro

ECB Sees No AI-driven Job Losses, Yet

European Central Bank President Christine Lagarde told the European Parliament this week that AI has raised productivity in the EU, but there is no strong evidence yet of a wave of layoffs due to greater automation of labour, signalling a measured policy stance on labour automation. The ECB intends to continue monitoring labour‑market dynamics and productivity impacts while keeping inflation and macroeconomic stability central to its policy approach. Reuters Bloomberg

System Insights

This week’s signals paint a picture of geoeconomic realignments and power moves that prioritise market access and cost competitiveness in the international system.

Until relatively recently, ideology played the dominant role in politics on both sides of the Atlantic; however, the trend so far this year can probably be best summed up by Bill Clinton’s observation from another era: “It’s the economy, stupid.” Still, we have come a long way from that era of economic globalisation; today, the priorities are more about creating bloc-based trade with reliable and like-minded partners.

Electioneering is already underway ahead of the US midterm elections, and it is becoming clear that the economy, national revival, and affordability will be dominant themes. The current direction of US economic and political policy is likely to keep benefiting investors in American markets for a while. But the tariff talk remains a risk concern for supply chains.

While the US looks set to continue on its protectionist America First path for at least the next while, the EU is moving in the opposite direction (in both a policy and geographical sense) with

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Every price movement in the market tells a story. It is a story of perception, emotion, and the collective intelligence hidden beneath the numbers.

So, what if the real signal isn’t in the charts, but in the actual system behind them?

Listen now.

Top Signal: Munich Security Conference 2026: Transatlantic Expectations and Europe’s Strategic Awakening

There was a lot of realism (and some optimism) on display this week, at the 62nd Munich Security Conference in Germany, particularly regarding the transatlantic relationship and the European security environment.

The US Secretary of State, Marco Rubio, signalled on what terms the US is seeking to renew the transatlantic relationship, in a speech imbued with political realism and appeals to common culture, faith, sovereignty, economic resilience, and history. He outlined a vision for the future that prioritises the national interest rather than the rules-based global order, which he said was:

“a foolish idea that ignored both human nature and it ignored the lessons of over 5,000 years of recorded human history.”

In outlining the American vision of renewal, he called for renewal of international institutions such as the UN and for strong allies, saying that:

“we do not want our allies to be weak, because that makes us weaker.”

Meanwhile, on the European side, the EU Commission President, Ursula von der Leyen, was in many respects aligned with the American vision, particularly on defence, telling the Munich audience in her speech that there is no other choice but for Europe to become more independent, in every dimension that affects its security and prosperity.

Referring to Secretary Rubio’s speech, she said:

“An independent Europe is a strong Europe. And a strong Europe makes for a stronger transatlantic alliance.”

She hailed Europe’s true awakening, where defence spending in 2025 in Europe was up close to 80% since before the war in Ukraine, with the EU mobilising up to EUR800 billion. By 2028, it is projected that defence investment in Europe could exceed the amount the US spent on equipment last year.

This week, the EU Commission President also called for the EU’s own obligatory mutual defence clause to be brought to life, the need for a new European security strategy, and raised the possibility of relying on the result of a qualified majority rather than unanimity within the EU to make faster decisions.

Within the EU, France is the sole nuclear power and a permanent member of the UN Security Council. The French president, Emmanuel Macron, projected an optimistic realism, calling for reform where:

“Europe has to become a geopolitical power”

He signalled that in the coming weeks, he will provide more details on the strategic dialogue with the German Chancellor, Friedrich Merz, and a few other European leaders about a re-articulation of nuclear deterrence.

The German Chancellor, the leader of the EU’s largest member state, in his address in Munich, also struck a realist tone, acknowledging that the old international order, which was based on rights and rules, effectively no longer exists.

The Chancellor said he agrees with the sentiment that Europe:

“has just returned from a long vacation from world history”

to what is now a world that is characterised by great power politics. He signalled that Germany is committed to making the Bundeswehr the strongest conventional army in Europe as soon as possible. Moreover, he signalled the need to forge resilient supply chains and reduce unilateral dependencies on raw materials, key products and technologies. He also linked European security to competitiveness and freedom, calling for the European defence industry to organise around standardisation, scaling, and simplification of arms systems.

Meanwhile, the continent’s only other nuclear power and permanent security council member, the United Kingdom, signalled a post-Brexit pivot when the Prime Minister, Sir Keir Starmer, said that there is:

“no British security without Europe, and no European security without Britain”

and also called for:

“a more European NATO, underpinned by deeper links between the UK and the EU, across defence, industry, tech, politics, and the wider economy”

He also said that Britain was enhancing its nuclear cooperation with France so that adversaries could be confronted by their combined strength. US State Department EU Commission Èlyseé German Federal Chancellery 10 Downing Street

India Positions Itself as a Global AI Hub

This week in New Delhi, the India AI Impact Summit 2026 showcased India’s ambition to define a third path in AI governance, one grounded in access, inclusion, and sovereign capability. It follows similar summits previously held in London, Paris, and Seoul and was attended by world leaders, including those from France, Spain, and Brazil, and many key leaders from the AI industry, including OpenAI, Google, Anthropic, and Mistral.

This was the first time such a summit has been held by a Global South nation, a shift which India believes:

“signals a broader move toward a more inclusive global AI dialogue”

The priorities of the summit focused on areas such as AI safety, data governance, transparency, human-centred development, and accountability frameworks.

India’s Prime Minister, Narendra Modi, said that India believes that:

“Technology is not a medium of power, but a medium of service, not power. The direction of AI should also be such that it leads to the welfare of the entire humanity.”

In many respects, developments at this week’s summit signal India’s emergence as a node of AI production and a demand centre for digital infrastructure in Asia. During the week, India signalled plans to massively ramp up its AI compute capacity, saying that over 50,000 GPUs will be deployed within the next six months, which effectively doubles its current capacity.

GPU is short for Graphics Processing Units, which are a specialised computer chip designed to perform many calculations at the same time and have become the engine room of modern AI because they excel at the kind of parallel computation needed to train and run large models.

The announcement this week is part of the government’s plan to make high-quality computing power accessible for startups, researchers, and students. India is reportedly currently ranked as the world’s third-largest AI ecosystem, behind the US and China.

Meanwhile, hundreds of billions in private investment were committed by some of India’s biggest conglomerates, such as Reliance, Tata, and Adani, to build national AI infrastructure and reduce dependence on foreign compute. US tech firms also announced partnerships and investments. Indian Government Le Monde Al Jazeera Times of India The Economic Times RFI PM Modi

Supreme Court Strikes Down Trump’s Tariffs

In a major legal setback for US President Trump’s economic and foreign policy agenda, the US Supreme Court ruled Friday, in a 6-3 decision, that his administration had exceeded its authority when it imposed tariffs on many of the US’s trading partners. The decision centres on President Trump’s use of the International Emergency Economic Powers Act (IEEPA), which the court ruled does not authorise the president to impose tariffs.

The decision curtails presidential power in trade policy and means that the administration could now be forced to unwind trade agreements it had struck with many countries, and also signals the possibility of having to reimburse potentially hundreds of billions of dollars in tariff refunds to importers. That could become litigious. It could also result in a significant deficit in the US federal budget.

The Supreme Court decision is a function of the separation of powers in the US system and signals a legal check on efforts by the Trump administration to expand presidential power away from Congress.

Nevertheless, later that day, the president responded to the Supreme Court decision with a new 10% tariff, this time using a different law (Section 122 of the 1974 Trade Act), which is expected to take effect on Tuesday with some exceptions. Reporting suggests that this new authority caps tariffs up to a maximum of 15% for 150 days, after which approval of Congress is needed (not an easy task, even with the Republican majority). US stocks rose following the announcement by the Supreme Court on Friday. US Supreme Court NYT WP CNBC Axios

System Insights

This week, the signals from both the Munich Security Conference and the India AI Summit illustrate a systemic shift in the international system, with world leaders increasingly acknowledging that the old global order is giving way to an emerging new order of semi-autonomous blocs, each prioritising

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The world rarely moves in straight lines. Too often, we treat problems as isolated: a delay here, a tariff there, a policy shift somewhere else. But in reality, problems don’t exist in isolation, because everything is connected.

Want to know why understanding interdependencies gives decision-makers a structural advantage? From global shipping chokepoints in the Red Sea to the delicate balance of U.S.–China economic relations, this episode explores how shocks ripple through markets, supply chains, and policy frameworks, and how thinking in networks, rather than silos, changes the game.

Top Signal: EU Leaders Brainstorm in Belgium to Boost Competitiveness

This week, EU heads of state and government retreated to the moated Alden Biesen castle in the Belgian countryside to discuss how the union can boost its own competitiveness amid sluggish growth, high energy costs, economic dependencies, and geopolitical rivalry with the U.S. and China.

The meeting agenda signals a gradual shift towards economic governance as a form of geopolitical statecraft, where competitiveness is vital for strategic resilience at a time of economic and political volatility in the international system.

The meeting was convened by the European Council, which represents the member states. The focus of the discussion centred on what action can be taken to deepen the single market, cut red tape, simplify regulation, scale up European businesses, pursue a European preference in some strategic areas, conclude more free trade deals, and improve investment conditions. It was also addressed by Mario Draghi and Enrico Letta, two former Italian prime ministers, who had previously produced two agenda-setting reports on European competitiveness and the single market.

This was a significant convening of European leaders, setting the tone for the upcoming larger spring summits that could define the EU’s economic direction in the coming years. European Council Guardian Politico EUCO President Costa on X

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Renewed EU Push for Economic Resilience

Staying with the EU, it was not only the European Council that was looking to move the needle this week, as other institutions such as the European Central Bank and the European Commission were also signalling the need for more urgency in structural reform and further integration. This week, the ECB President, Christine Lagarde, and the European Commission President, Ursula von der Leyen, reinforced calls for such an approach to strengthen productivity and resilience.

The ECB President is reported to have called on EU Leaders to take quick action across several key areas, which include deepening the single market, creating an EU savings and investment union, delivering the digital euro, and fostering innovation.

Meanwhile, in a speech to the European Parliament on Monday, the EU Commission President called for further progress on trade, the single market, and simplifying how business is done within the Union. President von der Leyen outlined the need to eliminate the bottlenecks in the most strategic value chains by stepping up production in Europe and expanding its network of reliable partners. She called for one large, deep, and liquid capital market rather than the existing fragmented infrastructure, the completion of the energy union, and, for certain strategic sectors, the need for the practice of European preference to strengthen Europe’s own production base.

This agenda signals an intention to move beyond defensive de-risking toward proactive capacity-building and dovetails directly with the competitiveness debates emerging from the European Council-organised meeting in Belgium, anchoring monetary and fiscal alignment to industrial and investment policy. However, finding agreement on a unified way forward is always a challenge, potentially opening up the need for a two-speed approach, which I have written about in a recent edition of this newsletter. Reuters EU Commission

The Buy-European Procurement Tilt

It has been a busy week in EU policy circles, particularly for the EU Commission President, Ursula von der Leyen, who was also at the Antwerp European Industry Summit in Belgium. In her keynote speech, she signalled that the European Commission plans to introduce new requirements in its public procurement processes that will give preference to low-carbon products produced within the EU, which is part of the forthcoming Industrial Accelerator Act (due later this month).

Public procurement is a powerful lever at the EU’s disposal, accounting for around 14% of EU GDP. Such an approach will allow the EU to pursue a European preference that explicitly requires EU content requirements for strategic sectors and to help steer public purchases away from subsidised foreign alternatives.

This approach complements the competitiveness and resilience agenda also signalled this week by the European Council, the ECB, and within the European Parliament, where public procurement is increasingly transformed into a strategic lever for building European supply-chain autonomy, industrial stability, and accelerating the green transition while directing more European money to European industries. It is a delicate balance to get right while navigating WTO rules and internal divisions on protectionism. EU Commission

Japan’s Supermajority Signals Policy Realignment

This week’s general election in Japan delivered a historic landslide win for Prime Minister Sanae Takaichi’s Liberal Democratic Party (LDP) and its coalition partner, the Japan Innovation Party, after it secured a two-thirds supermajority in the lower house, one of the largest lower-house mandates in post-war Japanese history. Together they won 354 seats in the 465-seat lower house in Japan’s parliament.

The result of this snap election provides a clear political mandate to the new conservative Takaichi government that should help stabilise Asia’s second-largest economy and potentially strengthen its role as a regional counterweight to China’s economic statecraft. It signals that a significant policy realignment is about to be unveiled, with the promise of completely new economic and fiscal policies.

The LDP’s dominance in this election’s outcome (it alone secured 315 seats) grants unprecedented leverage over economic, fiscal, and security policy. The new government is expected to pursue tax cuts, pro-growth fiscal measures, and modest defence-industrial expansion (within fiscal limits), with the prospect of reinforcing Japan’s position as a stable anchor in Asian supply chains. In many respects, Takanomics should be expected to be an evolution of Abenomics.

This week, the markets reacted with enthusiasm, with Tokyo’s Nikkei surging to an all-time high, on optimism about expected fiscal stimulus and policy continuity. Japan is one of the world’s largest economies, but it also has very high levels of debt. Without raising revenue to pay for the expected new policies, the new government will have to hope they pay for themselves. This week, some investors were reported to remain wary of another market meltdown over the new PM’s expansive spending plans. Le Monde WSJ NYT Japan Times Reuters CNBC

System Insights

This week’s key signals together are tied to several key emerging system trends. Firstly, Europe is reframing its competitiveness as a system in itself. It is increasingly merging industrial, fiscal, and financial policy into a coherent competitiveness architecture. This signals a long-term pivot from previous reactive crisis management to proactive geoeconomic strategy, with the intention of strengthening its place in the future international system. This policy realignment means that

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Top Signal: India-US Trade Announcement

After India signed what was described as the “mother of all deals” with the EU last week, a trade framework was announced this week between India and the US. The agreement is expected to cut U.S. tariffs on Made in India goods from 50% to 18%, reportedly in exchange for India halting the purchase of Russian oil and committing to $500 billion in U.S. energy, tech, and agriculture imports in the coming years. India is expected to also ease tariff and non-tariff barriers on American goods, which the US President signalled on social media this week would be “zero”.

India is a major importer of Russian oil, reported to be roughly 1.5 million barrels of Russian oil each day. President Trump said this week that India has agreed to replace the Russian crude imports with US and potentially Venezuelan oil, which is of a similar quality to Russian oil. However, details of this week’s agreement remain sketchy. Significantly, the Indian Prime Minister Modi did not mention the oil agreement in his communication. CNN NYT WSJ White House on X PM Modi on X

Key Signals

New Critical Minerals Trading Bloc

This week, the Trump administration signalled its intention to create a new critical minerals trading bloc together with its allies and partners at a meeting in Washington, which included officials from several European, Asian, and African nations, among others. Critical minerals are key components in many high-tech products, including electric vehicles and military hardware. This initiative could reduce reliance on China or even reshape global supply chains for these vital materials.

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Top Signal: EU–India Announce the “Mother of All Trade Deals”

This week, the European Union and India signed a landmark free-trade agreement in New Delhi after nearly two decades of negotiation, which has been described by both sides as the “mother of all deals”. If and when approved, it would significantly strengthen economic and political ties between …

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Top Signal: Trump-Greenland Crisis De-escalates (For Now, at Least) After Tariff Threats

This week, US President Trump, who had threatened new tariffs on several European countries both within and outside the EU including Denmark, Germany, France, Sweden, the Netherlands, Finland, the United Kingdom, and Norway over their support for Denmark and Greenland who had refused to negotiate a sale of the Arctic island for security needs, backed down citing reaching a framework for a long term deal on Arctic security. The move followed a meeting in Davos brokered by NATO Secretary-General Mark Rutte. Details remain elusive; however, sovereignty is a red line for Denmark and Greenland. Greenland is a semi-autonomous territory of Denmark.

EU leaders held an emergency summit in Brussels this week to discuss the latest developments, which could have included preparing €93 billion worth of retaliatory tariffs. Earlier in the week, the European Parliament had agreed to hold off the ratification of the EU-US trade deal, which was agreed last year. The EU’s anti-coercion tool, known as the “trade bazooka,” which effectively shuts off access to the European single market, was also an option. However, Trump stepped back following his trip to Davos, easing the immediate risks and sending European shares to a nearly two-month high. In his speech to political and business leaders at the World Economic Forum, Trump also ruled out taking military action against his NATO ally to acquire the territory. European lawmakers are now also likely to resume ratification of the trade deal.

With friction in the transatlantic relationship reaching a new high, the President of the European Commission is reported to have called on the EU to strengthen its economic power by diversifying its supply chains and also becoming more independent of the US. However, complicating matters is Europe’s continued dependence, at this point, on the US in security matters, particularly on the goal of ending the war in Ukraine. A week is a long time in transatlantic politics, and market volatility is likely to remain elevated. Reuters Euronews Le Monde Rfi WEF The Guardian

Key Signals

EU-Mercosur Deal Referred to Court of Justice in Razor-Thin Vote

The Northern transatlantic relationship was not the only source of trade friction this week, as the blooming trade relationship between the EU and the Southern Atlantic also hit a snag.

This week, the European Parliament voted 334-324 to refer the recently concluded EU-Mercosur trade agreement with Brazil, Argentina, Uruguay, and Paraguay to the Court of Justice of the European Union (CJEU), effectively freezing ratification and potentially delaying the deal by up to two years. The legal challenge questions whether the Commission can bypass national parliaments through provisional application, and whether the “rebalancing mechanism” improperly limits EU environmental and consumer health policies. Germany’s Chancellor Merz expressed his disappointment at Davos, while France hailed it as consistent with its opposition. Still, the Commission may provisionally apply the deal as early as March once Paraguay ratifies, however, not without a potential backlash within Europe. The deal, 25 years in the making, would, if and when approved, represent nearly 30% of global GDP and more than 700 million consumers, creating one of the world’s largest free trade areas. Le Monde Reuters Euronews

EU Signals Economic Reforms Amid Competitiveness Crunch

Returning to Davos, independence, strategic autonomy, and competitiveness were top priorities for EU leaders in attendance this week, as the continent faces a structural change in how the world is ordered. For the European Commission, that means making it easier to do business within the union. The EU Commission President, Ursula von der Leyen, outlined priorities for the coming period, which include creating a new European company structure, known as “EU Inc.”, with a single, simple set of rules that will apply seamlessly across the Union. There are also plans to establish the Savings and Investment Union to keep more capital within Europe for investment, and to build an interconnected, affordable energy market. Furthermore, the EU has started a cumulative surge in defence spending, which will invest up to €800 billion until 2030, and is actively pursuing further trade deals with key countries, including India, Australia, the Philippines, Thailand, Malaysia, and the UAE.

The leaders of the largest member states also echoed these priorities. The German Chancellor Friedrich Merz told his audience of political and business leaders that to succeed in this era of great power politics, Europe must face harsh realities and chart its course with clear-eyed realism. That means massive investment in defence, rapidly improved economic competitiveness, and working closer together within Europe. While French President Emmanuel Macron also prioritised more competitiveness and more autonomy, based on investment and innovation. EU Commission, German Federal Chancellery, French Presidency

Carney’s Middle-Power Manifesto

In a much-talked-about and thoughtful address at Davos this week, which contrasted with US President Trump’s worldview, Canada’s Prime Minister, Mark Carney, received a standing ovation after he spoke about the end of rules-based order and signalled a principled and pragmatic way forward for medium-sized powers such as Canada in this era of intensifying great power rivalry. It is an approach based on a belief that “middle powers must act together because if you are not at the table, you are on the menu”, he said. Rather than compete with each other to curry favour from the great powers, he proposed that they should instead combine to create a third path with impact.

He signalled building strength at home and pursuing “variable geometry” abroad, with “different coalitions for different issues, based on values and interests”.

Urging plurilateralism, he said Canada was championing efforts to build a bridge between the Trans-Pacific Partnership and the European Union, creating a new trading block of 1.5 billion people. On critical minerals, it is forming buyer’s clubs anchored in the G7 to diversify away from concentrated supply, and on AI, he said that Canada is cooperating with like-minded democracies to avoid having to choose between hegemons and hyperscalers. Prime Minister of Canada WEF Reuters

System Insights

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In business, as in politics, we’re often taught to avoid conflict because tension is seen as dysfunction, something that should be avoided or managed away. But what if that friction is actually the system’s way of signaling it’s time to evolve?

This episode explores why conflict is not always a communication breakdown, but a potential breakthrough; a vital feedback loop, one that drives innovation and renewal.

For leaders and decision-makers everywhere, the challenge is to harness conflict and to recognise the difference between productive tension that sharpens ideas and destructive rivalry that just corrodes trust.

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