The fundamental purpose of most businesses has long been to generate profit and create wealth for their stakeholders. From the mass production and vertical integration of the Ford Motor Company in the early 20th century to the focus on intellectual property, software and ecosystems by big tech firms such as Apple today, the methods used to achieve that purpose have evolved, particularly as technological innovation has progressed, financial engineering has become more sophisticated, and social relations have transformed.

For more than a century, business advantage largely came from scale, efficiency, and vertical control; the idea that producing more, faster, and more cheaply in a coordinated way was the dominant approach within the corporate world to deliver a competitive edge and shareholder value. Ford had initially standardised so much that you could have your Model T car in any colour you want as long as it was black. General Electric became the masters of optimising a portfolio of operations under expert management. Many businesses still operate on this basis today.

Pursuing scale and efficiency remains fundamental for competitiveness, but these alone seem no longer sufficient for stellar success in this new era. The external environment today looks a lot different from what it was just twenty years ago, when many of today’s leaders and managers first entered the workforce after learning about how past masters of business, such as GE’s Jack Welch, achieved so much success in his era.

But today’s international business landscape is more interconnected and increasingly defined by different dynamics such as geopolitical uncertainty, climate considerations, and algorithmic decision-making. In this environment, what once worked no longer seems enough. A different way of thinking and decision-making is needed.

That’s because profit and wealth are being increasingly rebuilt on a new foundation of systemic literacy, where the ability to understand and influence within complex systems from finance to technology, policy, or ecology determines who captures the most value and who is ultimately left behind. Today’s most successful firms, from data-driven platforms to green-energy pioneers who use resilient and adaptive strategies, illustrate just how much the international business environment has changed.

Systemic literacy is a way of understanding the world as an interconnected whole, a “system of systems” in which small interventions can cascade into global impact.

Examples include how Tesla has transformed car production into an integrated energy system that is reshaping global charging standards and industry structures, where its charging connector has become the de facto North American standard. Denmark’s Ørsted has evolved from a fossil-fuel utility into a global orchestrator of offshore wind ecosystems that now shape energy markets and supply chains worldwide.

The Hidden Systems Beneath Modern Wealth

Today’s Financial and Data Infrastructures

Across the world, capital and data now increasingly flow through algorithmic systems that shape markets in real time, defining the very parameters of commerce. Asset managers in North America are deploying AI in their investment processes, with those making the biggest impact aligning AI to strategy. In Europe, the European Central Bank’s Digital Euro and the EU Taxonomy for Sustainable Activities are embedding political goals and objectives into financial architecture. Meanwhile, in Asia, Alipay and WeChat Pay are merging payments, logistics, and social data, which are transforming urban finance and everyday life, and complementing state investment in digital infrastructure, which is aimed at narrowing the urban–rural divide.

The Structural Power Shift

The new trade routes have moved. Today they are digital platforms hidden in cyberspace where big tech firms such as Amazon and Alibaba excel at orchestrating the real-world logistics and market access. Algorithms now increasingly shape what consumers and firms around the world perceive as what the market actually is.

For most of the modern era, power tended to live inside key institutions such as governments or corporations. However, more recently it increasingly lives within the systems and control architectures that can even define what counts as a market in the first place.

But political leaders have found a way to re-exert control by regulating what is deemed acceptable behaviour in their jurisdictions. This development is a signal that platform governance and environmental considerations have become a central field of political economy. Policy is now embedded in data and technical standards. For example, the European Union’s 2018 GDPR data protection law and its 2022 Digital Markets Act attempt to rebalance this structural power by regulating the gatekeeping power of the largest digital companies. The 2022 U.S. CHIPS and Science Act has reconfigured semiconductor supply chains around national security objectives. Meanwhile, Japan and South Korea are using industrial strategy to secure energy and materials, with Japan’s GX Strategy and South Korea’s Framework Act on Supply Chain Stabilisation Support for Economic Security being good examples.

The EU is an interesting case as it increasingly exerts global regulatory influence in ways that have become known in political science circles as “the Brussels Effect”, a term coined by Columbia Law professor Anu Bradford. This phenomenon sees the EU’s large single market use its market power to regulate industries ranging from big pharma to big tech, to the extent that European internal rules effectively become global norms. The 2023 Carbon Border Adjustment Mechanism (CBAM) is a good example of the EU exporting European norms globally by compelling compliance with its regulations. Today, it has become more efficient for multinationals to scale a global product that also meets these European standards rather than having to build separate products for different markets. So the standards set in Europe are exported globally.

While the Brussels Effect is primarily regulatory and market-access driven, there are other power dynamics at play in the international economic system. China, a global economic powerhouse in its own right, has its own domestic strategy that blends industrial policy with digital surveillance infrastructure and is now actively exporting that model through initiatives like China Standards 2035, which aims to move from being a consumer of international standards to a producer and exporter. An emerging “Beijing Effect” that could lock countries into Chinese technologies and standards is a different approach that has had some success in parts of the world despite Western resistance.

Accelerated Change

Once these emerging systems start reinforcing themselves, change should be expected to accelerate and become less linear. Each new layer of data, infrastructure, or policy will amplify the next. Generative AI models, whether built by OpenAI in the US or DeepSeek in China, are now scaling at a pace that would have been unthinkable just a decade ago. Their growth is driven by a very simple loop where more data enables more computation, and more computation in turn produces more data. Stanford’s recent analysis shows how quickly the centre of gravity has shifted, where nearly 90% of notable AI models in 2024 originated from industry, up from 60% in 2023. In other words, the frontier is increasingly corporate.

All of this compute means that more energy should be expected to be consumed in the coming years, at a time when concerns continue to grow among policymakers about the impact of climate change on their societies. Thus, political power is also increasingly asserting itself in this domain. Initiatives such as the EU’s 2020 European Green Deal and the 2023 Fit for 55 packages, the 2022 U.S. Inflation Reduction Act, and China’s growing dominance in renewable technologies are accelerating the energy transition through a positive feedback loop between policy, capital, and innovation.

Five Ways Forward

So what can businesses do today to become more systems fluent in an international environment that is becoming less linear and more complex?

Here are five suggestions to make that leap based on current thinking:

1. Map the Systems That We Operate In.
   First of all, systems mapping can be a useful way to visualise interdependencies and move away from linear thinking. It’s like moving from playing checkers to playing chess. Network theory is also useful in revealing leverage points and risks. A small shift in one area can produce big changes everywhere.

2. Integrate Regulation Into Strategy.
   Situational awareness is important, so decision-makers need to watch out for the regulatory signals. New regulations signal where structural change is moving towards. In Europe, firms such as Siemens have aligned with EU sustainability frameworks, turning compliance into an advantage. These types of signals can be picked up earlier in the legislative cycle, before new regulations even become law. This early knowledge provides a significant advantage.

3. Invest in Interoperability.
   Innovation is forever important, but so too is interoperability. That means building platforms that plug into emerging standards. The 2024 EU Interoperable Europe Act shows how shared standards can drive resilience and growth.

4. Prioritise Trust and Legitimacy.
   In today’s economy, ethics has moved from the margins of corporate life to the core of business strategy. Transparency and ethics are now often preconditions for market access. Ørsted’s renewable transition is in many ways an instructive example of this.

5. Cultivate Systemic Thinkers and Translators.
   Adapting also means having the right people, in the right place, at the right time, who are also thinking in the most useful ways. Build an eclectic team that spans disciplines and mental models, combining economics, technology, strategy, and policy insight. This will enable better anticipation of future trends and the articulation of them from different perspectives.

Closing Thoughts

Peter Senge once described organisations as “learning systems.” The systems thinker, Donella Meadows, taught that leverage lies in feedback and structure. Today, those ideas increasingly define competitiveness.

Systemic literacy can help leaders to anticipate nonlinear shifts and build resilience. Scale and efficiency still matter in business. They are necessary but no longer sufficient. Understanding how systems interact in the interconnected global economy and then positioning strategy accordingly is an approach that should also be incorporated.

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In this edition: signal; system insights; what I am reading; and one last thing.

Signal

Strait Stays on a Knife-Edge as Iran Deal Yet to Be Done

There were positive signs last weekend US and Iranian diplomats were edging toward a framework that could ease tensions around the Strait of Hormuz, after US President Trump had posted on his social media platform that an agreement had been “largely negotiated” and was awaiting finalisation, with a flurry of regional diplomacy involving Pakistan, Qatar, Saudi Arabia, the UAE, Turkey, Egypt, Jordan and Bahrain.

• Subsequently, the Iranians reportedly poured cold water on the idea that a deal with the US was imminent, citing confusion in US positions and Israeli interference.

• However, the US Secretary of State Marco Rubio struck a more measured note, telling a White House cabinet meeting: “Diplomacy is the first option”. But he reminded the president that he has other options available to him if that doesn’t work.

• Still, the US reportedly conducted new military strikes against Iran this week in what were described as defensive in nature. Iran, meanwhile, said it had struck at a U.S. base in response.

• Reports emerged Thursday, citing the American side, suggesting that a deal had been reached but had yet to be approved, with the Iranian side saying it had not been finalised.

• Oil prices remained volatile this week as traders weighed up diplomatic progress towards a deal and fresh US and Iranian strikes. The international benchmark Brent crude price fell to just above $94 a barrel on Monday before rising the following day. By Friday afternoon, Brent oil prices were trading in a range of $87 to $92 a barrel.

• We are not there yet. But if a deal does emerge to end this three-month conflict, it will likely be a negotiated accommodation rather than a return to the pre-war status quo, with both sides seeking something they can claim as a win.

• The proposed 60-day framework deal reported last weekend would reportedly see Hormuz reopened without tolls, allow Iran to sell its oil, lift the US blockade on Iranian ports, with negotiations to follow on Iran’s nuclear programme later.

• However, semantics still matter. An Iranian official reportedly said in Tehran this week that while “there is no toll” on the Strait of Hormuz, ships wishing to cross will likely be required to make some form of payment, such as an environmental charge.

• Meanwhile, during the week, President Trump on his social media platform may have complicated matters further by requesting that the countries involved in the negotiations should sign the Abraham Accords, a set of agreements to normalise diplomacy between Israel and Arab states, and suggested Iran could be part of them.

• As things stand, the broad direction of travel is clear, but the diplomatic outcome remains fluid, and the reporting remains mixed.

On the Radar

The upcoming ECB interest rate decision, scheduled for 11 June, is shaping up as a key macro event for the euro area. The meeting will set the near‑term cost of capital, influence the euro’s trajectory against the dollar, and indirectly affect the financing environment for larger European spending priorities, including defence.

• That decision comes against a more difficult backdrop where external shocks are amplifying volatility. Reuters recently reported that ECB chief economist Philip Lane told Japan’s Nikkei that the bank will likely revise its inflation and growth forecasts next month due to the worsening outlook stemming from the Middle East conflict and persistently elevated energy prices.

• In the bank’s last monetary policy statement at the end of April, it was explicitly stated that they were not pre-committing to a particular rate path. However, the sentiment in the marketplace signals that they will hike rates.

• A majority of economists recently polled by Reuters now expect the ECB to hike rates in June, and nearly half expect another hike later this year. Only a few predicted three or more.

• While it is still speculative, if there were a scenario of a hiking cycle that pushes the deposit rate significantly upwards, say closer to 3% by year‑end, there is a risk that the resulting tightening could sharply increase refinancing pressures for fiscally fragile member states, particularly Italy, one of the euro area’s largest and most indebted economies.

System Insights

Deal or no deal. US and Israeli military operations against Iran since February 2026 and subsequent Iranian action have raised much concern about oil and natural gas markets, with roughly 20% of the world’s maritime trade in crude oil and petroleum products normally passing through the Strait.

The Iran/Hormuz crisis is the most concentrated expression of what the Indian-American political author and columnist Fareed Zakaria once presciently called the “post-American world”, a world in which the United States still plays a pivotal role, but in relative terms it is not what it once was, because of “the rise of the rest”.

In such a world, one could say that the US still has sufficient power to start wars but increasingly appears to lack the power to resolve them unilaterally. Looking at the world through this lens, the role of multiple countries such as the Gulf states, Pakistan, and Turkey in the negotiations is a feature of an emerging multipolar order, not a temporary diplomatic oddity. Still, it also bears noting that, while the world is becoming more multipolar, with most of these brokers having greater voice, for now they remain embedded within, rather than independent of, a broader US-led security order.

As the conflict unfolded, official data shows that US inflation has been pushed to 3.8% annually in April 2026 (which is nearly double the Federal Reserve’s target of 2% as part of its dual mandate). This is largely on the back of increased energy costs. A workable deal would likely ease energy-cost pressures and reduce upside risks to inflation over the coming months. However, a collapse in negotiations could mean a resumption of conflict and send the international Brent benchmark price sharply upwards with potentially severe consequences for global growth in many sectors, from manufacturing to transportation and tourism.

Given the volatility of the geopolitical situation, with both sides trading strikes this week, a deal is still very much possible, but with fresh complications such as President Trump’s Abraham Accords curveball, it would be premature to bet on a single outcome. Events are moving quickly, so preserving optionality across both scenarios is best.

Hike or hold. That is the question on the ECB’s mind ahead of next week’s rate decision. The marketplace now leans toward a June hike. The Eurozone’s central bank held its deposit rate at 2% for the third consecutive meeting on 30 April, but euro area inflation had jumped to 3% in April, driven by higher energy and service costs, while euro area GDP rose 0.1% quarter on quarter in Q1 2026 and 0.8% year on year, after recording 1.3% year-on-year in the previous quarter.

The ECB’s Governing Council considers that price stability is best maintained by aiming for 2% inflation over the medium term. The current inflation numbers are enough to keep pressure on policymakers.

With inflation rising and growth remaining weak, the euro area faces a familiar policy trade-off: tighten further to preserve price stability, or hold steady and risk allowing inflation to remain sticky.

The ECB is not pre-committing to a particular path, but market expectations have tilted toward a June hike; the key question is how far the Governing Council is willing to go if inflation remains elevated, and how it will manage transmission risks if sovereign stress reappears.

If a tightening cycle did sharply increase refinancing pressures for fiscally fragile member states, the ECB does have tools at its disposal, such as the Transmission Protection Instrument, but there are also eligibility criteria that member states would have to fulfil.

What I’m Reading

China’s Influence. Tobias Gehrke argues in an article for the European Council on Foreign Relations that China no longer needs to use economic coercion against Europe because just the threat of its expanding coercive tools is enough to make the EU self‑censor and abandon necessary industrial and trade defences, thereby achieving Beijing’s objectives at effectively a zero cost. How China’s silent coercion has Europe sanctioning itself – European Council on Foreign Relations

Global Capital. A new World Bank analysis by Arlan Brucal, Kanako Nannichi, and Francisco Aguilar Cisneros shows how global capital is converging on AI, digital infrastructure, and clean energy, the technologies set to define the next economic period. FDI is no longer chasing growth; it’s creating it, as investors bet on future demand rather than current income. Where global investment is headed: what the data say about digital innovation and the energy transition

A G-2 World. Following the US–China summit in Beijing, Zheng Wang argues in Foreign Affairs that a new G‑2 world is taking shape: one in which neither Washington nor Beijing can dominate or exclude the other. Both have discovered the limits of coercion, giving rise to an equilibrium of mutual denial. Taiwan is the most volatile fault line. The strategic task ahead is managing a tense but durable coexistence. The G-2 Reality: America and China Cannot Dominate or Exclude Each Other

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

One Last Thing

European Exports to the US Plunge 30% as Tariff Tensions Hit Trade Data

The transatlantic trade shock is now showing up in official EU trade statistics, with implications for EU corporate earnings, supply chain strategy, and geopolitical risk pricing.

The latest Eurostat data confirms that EU exports to the United States plunged 30.4% year-over-year in Q1 2026, falling to €119.4 billion, the largest drop among major trading partners. In the first quarter of 2026, the EU also imported 5.7% less from the US.

Overall, the EU trade surplus with the US narrowed to €34 billion from a peak of €80 billion in Q1 2025, an adjustment that is likely to be welcomed in Washington, where bilateral trade balances are a key focus of the Trump administration’s economic policy.

Part of this decline reflects a distorted comparison base, as US importers front-ran tariffs in early 2025. However, even after accounting for this, the broader trend points to weakening transatlantic trade momentum, though it is still too early to conclusively pronounce a structural shift. On a quarterly basis, EU exports to the US actually rose modestly (3%) in Q1 2026, and it’s important to note that the US remains the EU’s largest export market, accounting for 18.6% of total exports.

Time will tell what the next twelve months will bring, but there are two scenarios to consider. Trump has recently threatened a scenario of much higher tariffs on EU goods by July 4, 2026, but recent progress towards formal European institutional approval of the Turnberry Framework agreement suggests that the previously agreed 15% tariffs scenario is more likely to prevail.

The data for the second quarter of 2026, due in August, should provide further clarity on whether this is a temporary adjustment or the start of a more durable realignment.

Thoughts shared here are intended for discussion and knowledge only, not financial, investment, or legal advice. Always chat with your advisors first. - Horizon Briefing returns in early August after the summer break.

In this edition: signal; system insights; what I’m reading; and one last thing.

Signal

The West Still Coordinates

This week in Paris, G7 finance ministers, their central bank governors, leaders of key international financial institutions, and other guests met in the G7 multilateral format amid significant challenges to the international system, including rising concerns about global economic imbalances, public debt, and bond market volatility, as the impact of geopolitical events reverberates throughout the international economy.

The gathering, hosted by France, comes ahead of next month’s G7 leaders’ summit in Evian and on the back of last week’s high-profile but inconclusive summit between U.S. President Donald Trump and Chinese President Xi Jinping in Beijing.

Ahead of the meeting, French officials were reported to have succinctly framed the economic pattern:

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In this edition: signal; system insights; what I am reading; and one last thing.

Signal

No Significant Breakthroughs in Beijing

• U.S. President Donald Trump travelled to Beijing this week to meet with Chinese President Xi Jinping, with the expectations around the highly anticipated summit tempered by the ongoing war in Iran.

• It was President Trump’s first trip to China since 2017 and his first face-to-face with Xi since their October 2025 summit in South Korea.

Why It Matters:

• Given the geopolitical context in which neither side fully controls, this was arguably expected to be one of the most consequential bilateral meetings between the US and China in some time.

• Any useful cooperation between the U.S. and China is good for both countries but also for international stability, particularly on reopening the Strait of Hormuz, which could offer near-term relief to international oil prices.

• While there were no significant breakthroughs at this summit, some trade business was completed, and President Xi has been formally invited to visit the US in September.

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In this edition: signal; system insights; what I am reading; and one last thing.

Signal

Washington and Beijing Could Move Toward AI Diplomacy Amid Strategic Decoupling

The United States and China are reportedly considering formal talks on artificial intelligence ahead of a planned Trump–Xi summit in Beijing next week, according to the Wall Street Journal.

The discussions would take place against a backdrop of export controls, semiconductor restrictions, rare-earth negotiations, and broader geopolitical competition.

The U.S. continues tightening controls on advanced AI chips, and China is accelerating efforts to build technological self-sufficiency.

Background Details:

• Washington wants greater access to Chinese rare earth minerals and strategic industrial inputs.

• Beijing wants relief from U.S. semiconductor export controls.

• AI discussions could become institutionalised as part of broader US–China strategic management.

• Taiwan remains a central flashpoint in negotiations.

• Major powers such as the United States and China are increasingly treating semiconductors, energy grids, and rare earths as geopolitical assets rather than purely commercial sectors.

• Chinese state-owned media recently highlighted how the two countries working together could help both nations overcome energy bottlenecks that threaten global AI development.

• Former US President Biden had previously engaged with Chinese President Xi on AI at a summit in California in 2023, and both sides subsequently announced in 2024 that humans, rather than AI, would retain authority over nuclear-launch decisions.

Sources: WSJ Reuters China Daily

On the Radar

EU Scrambles to Contain Latest Transatlantic Trade Rupture

After US President Trump threatened to raise tariffs on EU cars and trucks from 15% to 25%, negotiators from both sides met in Europe this week to defuse the escalation.

• The EU and the US struck a framework trade agreement at a summit in Turnberry, Scotland, last summer.

• Still, since then, a US Supreme Court ruling has introduced fresh uncertainty around the tariff framework, and the European Parliament has slowed the ratification process.

• The US side has become dissatisfied with the pace of European ratification. European leaders and lawmakers stress procedural legitimacy and robust safeguards.

• However, after talks this week and reports of some progress, US negotiators, MEPs and the EU member-states failed to reach an agreement. They have, however, agreed to meet again after more than 6 hours of talks on Wednesday.

Sources: WSJ Euronews Politico EU Commission

System Insights

US-China Summit: Rather than just another technology race, AI is fast becoming an infrastructure for geopolitical power. Governments increasingly view advanced AI capabilities as strategic assets, much as earlier generations viewed oil, naval power, or nuclear technology, because they are tied directly to national security, industrial competitiveness, and military capability.

Just as important, the scale and uncertainty of AI’s future capabilities mean that the world’s two largest economies, and geopolitical rivals, should ideally cooperate on shared risks. Businesses now operate in a world where technology supply chains are shaped by diplomacy, sanctions, and strategic rivalry.

EU-US Trade: The EU-US trade relationship is among the most significant in the world, with over €4.2 billion of goods and services crossing the Atlantic every day, according to EU estimates. Trade is now clearly being used as leverage inside the transatlantic alliance rather than just as a commercial tool. Europe may have thought it had a settled agreement with the US administration that restored stability and predictability, setting a US tariff ceiling of 15% for most EU exports, but now that the US is already looking to renegotiate terms, some European politicians are wondering how reliable an agreement with the current administration can be.

Finding a balanced deal is difficult because the underlying rationale of an “America First” policy approach means that, from the Trump administration’s point of view, Europe must come at least second. Zero-sum relative gains trump a mutually beneficial outcome in this American administration’s approach towards its long-time European allies. Europe seemed to accept that reality last summer as the current price to pay for access to the US market (because alternatives could have been worse) when the EU Commission President Ursula von der Leyen signed the trade agreement with the US. Now they find themselves scrambling again to contain the latest transatlantic trade rupture.

For European businesses, the latest US tariff threats are especially sensitive (particularly in Germany), because autos sit at the centre of industrial employment, supplier networks, and regional politics. The US is the second largest market for new EU vehicle exports (after the UK), accounting for 18.4% of the EU export market in 2025, according to ACEA, the European Automobile Manufacturers’ Association. Yet again, European executives find themselves reviewing their exposure to US sales, tariff pass-through, pricing power, and deciding on the relative value of investing in localised production to further growth prospects in the US economy in the short to medium-term.

What I am Reading

US-China Relationship. Ahead of the summit between US President Trump and Chinese President Xi Jinping in Beijing next week, Thomas Friedman argues in The New York Times this week that the U.S. and China now face a shared, non‑state threat more dangerous than their geopolitical rivalry from agentic AI systems capable of enabling small actors to launch catastrophic cyberattacks. Washington and Beijing must cooperate because “our fates are now fused”. Opinion | The U.S. and China Have a Common Foe. Hint: It’s Not the U.S.S.R. - The New York Times

US-German Relationship. Jörg Lau argues in The Guardian this week that Friedrich Merz’s confrontation with Donald Trump marks a historic break in the German‑US relationship, but one year on from his election as Chancellor, Merz is choosing not to back down because he sees the status quo as unsustainable. Why Friedrich Merz decided to risk Donald Trump’s wrath | Jörg Lau | The Guardian

Transatlantic Security Order. Jackson Janes and Markus Ziener, both senior fellows at the German Marshall Fund, argue in Just Security that the post-1945 transatlantic security order, in which Europe integrated internally while relying on unconditional American protection, is over. Europe must pay the “subscription” to the US for now while it urgently rebuilds its strategic capacity and reforms its decision-making structures. The Unraveling of the North Atlantic Bargain

One Last Thing

Low-Carbon Electricity. Against a backdrop of renewed concern over fossil-fuel supply disruption in the Middle East, and away from the headlines, a quieter shift is underway.

This week, Our World in Data highlighted a 2025 milestone: low-carbon electricity sources grew faster than demand, and fossil generation fell overall. Based on Ember’s Global Electricity Review 2026, the analysis notes that solar and wind drove most of the growth, while a small rise in gas was more than offset by declines in coal and oil.

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

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

Signal

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, kee…

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

Signal

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.

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In this edition: signal; system insights; what I am reading; and one last thing.

Signal

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.

• Brent crude, the international oil price benchmark, broke through $100 a barrel, falling back below that mark as the week progressed.

• Last week, just 24 ships passed through the Strait out to the ocean, according to reports. This is just a fraction of the ships that normally passed through before the conflict began.

• China, India, Japan and South Korea reportedly account for 75% of oil and 59% of LNG exports from the region according to recently published research, making Asian supply chains deeply exposed.

• The IEA Executive Director Fatih Birol said this week in an interview with AP that Europe has “maybe six weeks or so (of) jet fuel left”, if the Strait of Hormuz is not opened.

Sources: AP US Central Command France 24 OilMarkets.com NBC News Zero Carbon Analytics NYT The Guardian Reuters Iran’s FM Seyed Abbas Araghchi on X Iran’s Speaker of Parliament, MB Ghalibaf on X Market Watch Axios Horizon 11 April IEA

A Darker Outlook for the Global Economy

As flagged in last week’s edition of this Horizon briefing, the IMF this week released its flagship April 2026 World Economic Outlook report at its Spring Meetings in Washington, D.C.

• It is arguably the most sobering report since the COVID-19 lockdown of 2020. The title says it all: “Global Economy in the Shadow of War.”

Why this matters: This is a warning signal from a leading international financial institution about the systemic risks that are now compounding simultaneously.

• IMF chief economist Pierre-Olivier Gourinchas wrote that the war in the Middle East “interrupted what had been a steady growth trajectory”.

• He said, before the war, the fund was poised to upgrade its global growth forecast, reflecting continued momentum in the global economy. But the forces of this momentum (tech investment boom, easing trade tensions, targeted fiscal support, and favourable financial conditions) will be overwhelmed by the war.

• Central banks already navigating a post-tariff inflation overhang now face the worst of all policies with an energy shock pushing inflation up at the same time as growth is being knocked down.

Key details:

• Assuming a short-lived conflict, the fund projects global growth of 3.1% this year, a downward revision of 0.2% from their January projections. Headline inflation is expected to rise to 4.4% in 2026 from 4.1% in 2025.

• Under an adverse scenario, global output is expected to decline to 2.5% in 2026, with inflation rising to 5.4%.

• Under a severe scenario, growth would be around 2% this year and next, and global headline inflation would come close to 6%. In such a scenario, the fund believes that the global economy would come close to experiencing a recession.

• Beyond geopolitics, other risks on the fund’s horizon include renewed trade friction, an AI market correction, fiscal pressures risk driving up long-term interest rates, and institutional erosion, where weakening central bank independence or policy credibility could spike inflation expectations.

• On the upside: Increased AI investment and adoption could boost productivity and business dynamism. Structural reforms and a continued easing of trade tensions could further lift economic activity.

• The 21 eurozone countries are forecast to grow just 1.1% in 2026, down from 1.4% in 2025, hit hard by energy disruptions. Britain is expected to grow by 0.8%, Canada by 1.5%, Japan by 0.7%, and the United States by 2.3%.

• Higher commodity prices have led to an upward revision of Russia’s growth forecast to 1.1% in 2026.

• Growth in the Middle East and Central Asia is set to decline to 1.9% this year as the region is most directly impacted by the ongoing conflict.

Sources: IMF WEO April 2026

System Insights

The Iran War and the current situation in the Strait of Hormuz are perhaps the most acute expression of systemic pressure, where the United States, so far, appears to be using its military dominance not for the traditional purposes that would have been expected in the liberal international order’s heyday: to stabilise a public good of open shipping lanes. Instead, the current effect seems more intent on using maritime control as coercive leverage. From a realist perspective, this is power politics at its rawest.

The short-term consequence is an energy price shock. However, the medium-term consequence, if the blockade is sustained, could represent something far more structural that significantly disrupts energy supply chains, particularly for the Asia-Pacific economies. China, India, Japan and South Korea together account for 75% of oil and 59% of LNG exports from the Gulf. Those nations should be expected to increase investment in alternative supply routes and energy sources. The “globalisation of insecurity” is now a real and tangible market variable.

The IMF WEO, published this week, is reflective of a “negative supply shock”, the textbook stagflationary scenario, and comes on top of an already fragile global system. The fund notes that war in the Middle East has halted what was a genuinely improving trajectory. Higher energy prices are a textbook negative supply shock because they raise production costs and consumer prices, disrupting supply chains and eroding purchasing power.

This, no doubt, will cause much discomfort for central banks. The ECB, the Bank of England, and, perhaps to a lesser degree the Fed, all facing their own version of the same impossible dilemma: do they cut rates to protect growth, or do they hold/raise to contain inflation reignited by an energy shock?

The IMF’s own analysis shows that defence spending booms, which are accelerating this year, can boost economic activity in the short term but also temporarily increase inflation and create significant medium-term challenges. To avoid risks of overheating the economy, close coordination with monetary policy is also required.

What I am Reading

A New Form of World War. Paul Poast, an associate professor of political science at the University of Chicago, argued in a guest essay in The New York Times that the ongoing wars in Ukraine and Iran constitute a new form of world war, which are simultaneous, interconnected conflicts in which major powers indirectly confront each other by arming opposing sides. Drawing on historical precedents, he contends that today’s multipolar competition and the growing willingness of leaders to use military force create conditions in which limited wars can escalate across regions. To avoid unintended global conflict, leaders must adopt a genuinely global strategic lens. Opinion | A New Era of World War Has Arrived - The New York Times

European Asset Manager Risks. Dirk Schoenmaker, in a policy brief for the think tank Bruegel, argues that Europe faces mounting strategic, regulatory, and sustainability risks because US asset managers with different priorities on stewardship issues are rapidly becoming dominant in the European market. The EU must respond with stronger stewardship rules, centralised supervision, and proactive action to preserve European strategic autonomy. Risks for Europe of US dominance of global asset management

Tech Skills Adjustment. Shira Ovide and Andrew Van Dam argued in The Washington Post this week that the apparent decline in computer science majors is less about AI killing coding jobs than we may initially suspect and more about students redistributing into newer, adjacent tech disciplines amid a tougher job market and shifting perceptions of opportunity, suggesting that a structural adjustment is underway in the U.S. human-capital pipeline. https://www.washingtonpost.com/technology/2026/04/13/computer-science-major-ai/

Demographic Surge and Jobs. Staying with the subject of the jobs market, but this time on a more global scale. Ajay Banga, President of the World Bank Group, and Elisabeth Svantesson, chair of its Development Committee, argue that the world is now entering a decade where a massive demographic surge in developing countries collides with tighter public finances, and the only viable way to turn this population growth into jobs is by improving the policy and regulatory environment so private investment can scale. To turn demographic growth into jobs, get the rules right | World Bank Group blogs

One Last Thing

In the same week as the results of the elections in Hungary came through and delivered a political rupture, it was reported in Politico this week that the European Commission President, Ursula von der Leyen, called for qualified majority voting in foreign affairs, citing the need for a faster response to geopolitical events.

If member states agree to it, it would effectively end the unanimity requirement in foreign policy decisions. Such a move would speed up decision-making but would also be a move away from the EU’s intergovernmental origins, which traditionally left foreign affairs decision-making in the hands of member states. It would erode national veto power and potentially lock in the preferences of larger members.

Henry Kissinger, the former US Secretary of State, is often cited for asking ‘Who do I call if I want to call Europe?” If member states choose to grant these powers for the improvement of decision-making efficiency, it would go some way towards the EU member states speaking with one voice. It would also promise more predictable signals amid rising geoeconomic tensions, such as sanctions and other foreign‑policy‑linked measures.

However, even with QMV in the European Council (which represents the member states), the EU still combines multiple institutions (Commission, Council, High Representative), and member‑state diplomacy often continues in parallel.

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

In this edition: Signals; systemic insights; what I’m reading; one last thing.

Key Signals

A Temporary Pause in Hostilities

The single most consequential geopolitical event of the week was the last-hour agreement towards a temporary pause in hostilities in the ongoing US-Israel-Iran conflict in the Middle East.

• 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

• 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:

Read more

In this edition: Signals; systemic insights; 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 both an energy shock and 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

Read more

In this edition: Signals; systemic insights; what I am reading; and one last thing.

Top Signal: 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…”

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.

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. 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.

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 political 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,

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 sort of 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 have referred to as 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

to scan the horizon, pay attention to signals suggesting something is about to change, and assess its potential impact, so we can reduce exposure, hedge, or adapt as needed.

Traditional business strategy frameworks (e.g., Porter’s Five Forces) are always helpful because they look at competitors and suppliers. However, a non-market strategy is also essential because it helps consider more broadly those risks emerging from the political economy that impact the marketplace.

Political risk is present in different forms and at different levels, from local planning decisions to the decisions in international political institutions to geopolitical decisions in major capitals that determine war and peace. They all have direct or indirect ways of impacting the marketplace.

Those risks could impact several areas, such as where to locate, the cost of inputs, the cost of serving our market, or how attractive our business is to potential investors. Geopolitical risk can also affect consumer and investor confidence, particularly when there is a heightened perception of doom or uncertain outcomes.

Useful Tools and Approaches

Mapping suppliers by geopolitical risk supports scenario planning (e.g., what if Hormuz closes for 30+ days) and diversification decisions, if they become necessary. Digital risk monitoring allows real-time dashboard visibility (e.g., tracking Hormuz tankers) for early signals of disruption.

Investors often overlook or don’t look closely enough at the disruption and volatility that geopolitical decisions can cause in both the short and long term (at such a point, they can also start to become structural). Incorporating such considerations into investment mandates can help decision-making in terms of holdings, what to rebalance to, and smooth out the effects of volatility.

Tools such as the Geopolitical Risk Index, compiled by Fed economists Dario Caldara and Matteo Iacoviello, can help uncover signals of lower investment, stock prices, and employment, and the probability of economic turmoil.

In 2026, the “Market” is increasingly volatile because the “Political Economy” is increasingly fractured. Strategists must now account for external factors such as geopolitical risk considerations. These days, a sudden change in trade policy (Political Economy) can instantly impact a low-cost supply chain (Market).

Moreover, if today’s market creates outcomes that the political economy finds “unfair” (e.g., AI-driven mass unemployment), it should be expected that it is only a matter of time before the system will eventually “correct” the market through political intervention, through policy and regulation, which also creates new risks and uncertainties.

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.

If central banks keep interest rates high to contain inflation, they also risk slowing the economy further. However, if they cut rates to support growth, they risk allowing inflation to re-accelerate. There are no easy answers for central banks around the world, such as the Fed and the ECB.

Some prominent commentary this week notes that central banks are watching the oil shock closely because it could trigger broader financial stress across markets, not just inflation. An oil‑price shock can cascade through the financial system by simultaneously raising inflation, weakening demand, and stressing fragile non‑bank sectors, thus creating feedback loops that constrain central banks and amplify instability.

For businesses and investors, the takeaway is simple: the macroeconomic environment could become less predictable and more policy-driven going forward. Guardian Marketwatch WSJ Reuters

EU’s Energy Strategy Just Pivoted (Back) Towards Nuclear

One of the more interesting strategic signals this week came not from markets but from Brussels.

Well, Paris actually. In a speech in the French capital on 10 March at the Nuclear Energy Summit, European Commission President Ursula von der Leyen made a striking admission: Europe’s decision over the past decades to reduce nuclear power was, in her words, a “strategic mistake.”

Here is an excerpt from her speech:

“Over the last decade, we have made great progress on renewables. Solar PV and wind have overtaken fossil fuels in the EU’s power mix. And our European wind turbine manufacturers are global powerhouses. They are exporting high-tech made in Europe to the world. The nuclear story, unfortunately, is different. While in 1990 one-third of Europe’s electricity came from nuclear, today it is only close to 15%. This reduction in the share of nuclear was a choice, I believe that it was a strategic mistake for Europe to turn its back on a reliable, affordable source of low-emissions power.”

This context matters. Her remarks came in the same month that saw oil prices surge, and left Europe once again facing energy market volatility triggered by the crisis in the Middle East. In her speech, Von der Leyen also admitted that reducing nuclear power had left Europe too dependent on expensive and volatile imports, which had put the EU at a structural disadvantage in comparison to other regions.

The decline in nuclear use coincided with policy decisions in several countries in recent years, most notably Germany, to phase out nuclear plants after the Fukushima disaster in Japan (Von der Leyen was also a minister in Merkel’s government that chose to turn away from nuclear). Nuclear power is reportedly generated today in 13 out of the 27 EU member states.

Whatever about the past, this week’s speech signalled a more forward-looking shift in policy. The European Commission announced plans to support the sector with €200 million in investment guarantees for innovative nuclear technologies, including next-generation reactors and small modular reactors (SMRs). The funding will come from the EU’s carbon market and is designed to encourage private investment in nuclear projects across Europe.

In framing the strategy in geopolitical terms, Europe, Von der Leyen argued, cannot rely solely on renewables because the continent lacks large domestic fossil fuel reserves. A resilient energy system, she signalled, must combine renewables and nuclear as:

“joint guarantors of independence, security of supply, and competitiveness.”

This shift reflects a broader debate across Europe. Some governments, including France, the Czech Republic, and Poland, have been pushing for new nuclear capacity to support heavy industry and stabilise electricity supply. However, others, including Austria and Luxembourg, are reportedly strongly opposed. The EU’s nuclear sector is already estimated to contribute over EUR250 billion per year to the EU economy and support more than 883,000 jobs, according to World Nuclear News.

The timing of the pivot is quite telling. The Middle East energy shock is in many ways acting as a policy accelerator, reinforcing a lesson Europe has already learned from the Ukraine war: energy dependence is bad because it translates directly into geopolitical vulnerability.

Electricity is in many respects becoming the new oil because it is fundamental to the industries of the future, which need affordable electricity. While its geography has not endowed it with an abundance of fossil fuels, the EU does have a better chance to lead in this space.

Here is more from Von der Leyen’s speech:

“Europe’s electricity prices are structurally too high. This matters enormously. Because affordable electricity is not only important for our citizens’ cost of living, but it is also decisive for our industrial competitiveness.

…The nuclear tech race is on. But we know that Europe has everything it needs to lead. We have half a million highly skilled workers in nuclear – far more than the US and China. We lead global innovation in modular reactors. And now we have the ambition to move at speed and scale for Europe to be a global hub of next-generation nuclear energy.”

The future European energy mix looks set to revolve around three pillars rather than one: renewables, strategic storage and grids, and nuclear. This signal from the Commission may mark the early stages of something that looked unlikely just a few years ago: we may be about to witness a European nuclear revival. EU Commission Reuters World Nuclear News

System Insights

There is an overall pattern in this week’s signals. We are moving into a period where, from conflict in the Middle East to nuclear innovation in Europe, the geopolitical system, economic system, and technological system are interacting simultaneously:

When shocks occur in one system, such as energy disruption in the Middle East, they cascade through the others. Energy shocks raise inflation. Inflation constrains central banks. Monetary policy affects markets. Markets influence investment and hiring. Oil shocks are leading to a rethink in Europe on nuclear technology. That is a clear example of systems dynamics at play: feedback loops rather than isolated events.

These have implications for business strategy. Geopolitics is increasingly a business variable. Supply chains, energy costs, and market access increasingly depend on geopolitical stability.

The idea of a predictable global economy looks increasingly outdated, so business decision-makers need to design strategies fit for a system imbued with volatility rather than stability.

Competitive advantage in Europe and beyond will increasingly depend on positioning inside the newly emerging strategic sectors: energy security, AI infrastructure, and resilient supply chains.

Viewing these signals as part of a wider connected system will lead to better proactive, rational decisions rather than falling victim to groupthink or reacting to narrative-driven headlines.

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

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

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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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