Last weekend, I read a newspaper article about how students in England who are about to enter university are ditching the humanities for subjects such as medicine, law, and engineering, which are perceived as offering greater job security after graduation. It is a trend that has been growing for several years, often driven by the need to earn money quickly in an education system where most students take on considerable debt compared with students in other European countries. England has produced some of the world’s most successful humanities graduates, including J. R. R. Tolkien and J. K. Rowling. Some students would no doubt prefer the freedom to pursue what they are most passionate about and succeed on their own terms, but instead feel compelled to make a calculated career decision before their adult lives have really begun. For many, choosing a university course will be the first time they have had to make a decisive choice between financial security and the freedom to become the person they truly want to be.

Long before modern society, human beings have often pondered how much protection they needed to feel secure and how much freedom they needed to adapt and create meaning in their life. There always seems to have been a historical tension between one and the other, but it is more difficult to have sufficient amounts of both at the same time.

Ancient philosophers such as Plato and Aristotle thought about these sorts of issues nearly 2500 years ago. Later, political philosophers such as Hobbes and Locke provided the initial frameworks for this dilemma. The pessimistic Hobbes, leaning towards security, had imagined life without an overarching authority as chaos, while the more optimistic Locke insisted that liberty was essential for trust and progress. But centuries later, their philosophical debate still lives on, even beyond the philosophy departments of universities. This perennial debate is at the core of how societies work. It also matters when we make decisions about our career or invest for our future.

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But this tension is also a systems problem. It would not be complete to say that security and freedom are just philosophical opposites. Rather, they are more like twin forces that oscillate within every system, pulling and pushing, shaped by feedback loops, incentives, constraints, and the way risks propagate through complex environments such as the international political system.

When political leaders over‑optimise for security, they often trigger second‑order effects that reduce their ability to adapt or survive later. Take the example of the Cold War, which divided a large part of the world during the second half of the last century. Many of the leaders of the nations engaged in this conflict had come to realise that while security can make you feel relatively safe, too much of it could also become a trap. A security dilemma arose where one side’s defence became the other’s threat. The quest for more security just made the system feel more insecure. For citizens, it meant there were things you couldn’t do, places you could not visit. Freedom became a casualty of security. The eventual collapse of the Soviet system showed clearly how too much security without enough freedom left it unable to adapt. In the aftermath of 9/11, Western societies also experienced the phenomenon of too much security and not enough freedom as travelling by air became more cumbersome. More recently, the quest for health security during the COVID pandemic led to national lockdowns in many countries throughout the world but also produced economic and social consequences, with increased unemployment and isolation a factor for many.

In the workplace, a similar story has also unfolded over time. Take the example of the loyal Japanese salaryman (サラリーマン) who found stability in his work life, but at the cost of creativity, or the restless Silicon Valley workers who have pursued freedom over job security but also discovered job volatility and burnout. Investors also face this same sort of dilemma when they trade in the financial markets. Their priorities reflect how they trade. For example, bonds offer relatively good financial safety; some sometimes claim to be as good as gold, but they offer little growth. Equities promise greater freedom through higher returns, but they are also exposed to wild swings in the market, so they offer less security. Everywhere we find human decision, it seems we run into this dilemma.

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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. What is often called 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.

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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 system, 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 systems 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 system of international business has changed.

Systems literacy is a way of understanding the world as an interconnected whole, a “system of systems” in which well-placed small interventions can cascade into large-scale or even 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.

Systems 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 most companies, we’re often led to believe that the org chart tells us everything we need to know about how the business works and what our role is within it. The arrows and boxes tell us who should report to whom, who has responsibility over each particular area, and who is ultimately in charge.

It’s a comforting picture of how a business should operate and probably a lot closer to what we may think is the case on our first day on the job, straight out of university. But if only everything were so linear and structured, we would never have to worry about distractions such as office politics or internal power plays and just focus on getting the job done. Life would be more straightforward.

Anyone who’s spent time inside a modern business organisation knows that the official hierarchical structure is only part of the picture, or at least they often have that feeling that there is something else at play because the big decisions that are often taken don’t always neatly align with business priorities or the formal structures we would expect. Things often pan out differently when strategies that were supposed to drive the business forward actually stall or fade away from the agenda, and people with no official title somehow manage to exert more influence over the direction of the business than those officially higher up on the org chart. Silos and fiefdoms sometimes develop while at the same time higher management is encouraging team collaboration.

Sometimes we are left scratching our heads after a team meeting wondering how the latest decisions taken are in any way aligned with what the business strategy is supposed to be. The CEO says one thing at the annual get-together, but that is not how things are done locally. I remember a regional manager once telling me that in his view, head office makes the strategy sound so simple; he left motivated after the annual kickoff event, but within a week he felt he was back to fighting trench warfare.

Without figuring out why this happens, it is no surprise that the workplace environment can lead some to become demotivated, cynical or even worse for the business: they start looking for a new role elsewhere. Sometimes it is really only the fear of running into the same kind of environment elsewhere that keeps people in their existing roles.

To figure out why things don’t turn out as we are often led to expect, it is useful to look to another part of society where we see this same type of phenomenon: political life.

In the political world, at least the democratic world that I am most familiar with, there is also an official type of org chart with the head of state at the top, the government and the various local authorities and state bodies who are tasked with implementing the policies that people voted for. But it doesn’t always turn out that way: programmes are abandoned, or decisions are made on matters that nobody voted for. For example, almost nobody votes to go to war out of choice, but it seems to happen more often than it should in some countries.

The thing to realise is that power has more than one face; it isn’t just about structure, it operates inside a system of relationships, incentives, and constraints. This is exactly what British political scientist Steven Lukes uncovered in his classic “three dimensions of power” model. He wasn’t thinking about corporations when he developed it, but political science and business often blend into each other (many business models have their origins in political science), especially when it comes to change, conflict, or transformation. Lukes gives us a sharp lens for understanding how power actually operates. It is particularly useful to adapt it to a business setting because so often in business we’re grappling with internal complexity.

The Political Science Model

Lukes’ Three Dimensions of Power challenged the old idea that power only has one face, that it is only about who wins a debate or a vote. That’s just what we see at the surface. But below that social veneer there are two deeper, subtler layers of influence: what gets discussed, what doesn’t, and what people believe is even possible.

Here is how the model works:

Different approaches have been used to illustrate this model graphically, such as a pyramid and concentric circles with visible power in the centre. However, I think the iceberg approach works really well in illustrating the power that is visible on the surface but invisible below. The power below the surface explains that feeling we may often have that there is something else at play than the official priorities.

The Three Faces of Power:

Visible Power (overt power)

This is the power we can see, such as who prevails in a formal decision or vote. Examples also include a budget signed off, a key leader appointed, or the approval of a new strategy.

Agenda Power (the mobilisation of bias)

Agenda power is about who decides what even makes it onto the table for discussion. For example, we may have a transformative proposal that could drive new business in new areas, but if we can’t get it on the agenda, it's not going to happen.

Ideological Power (deep cultural assumptions or unspoken norms)

Ideological power is even more subtle; it is about who shapes what people believe is possible, normal, or acceptable. For example, cultures that make disagreement feel like an action of disloyalty rather than constructive feedback, or status quo assumptions that are never allowed to be questioned. This can include non-discussion about business branding or mythologies about “what makes us successful”, even when there are better options that even higher management would like to hear if only the idea could reach up to them.

Power is often about outcomes, but this model shows that power is also about the battles that never get fought.

Why This Matters for Business

This is political theory that I am applying to the business world because it has a real practical use. Once you see it, you really can’t unsee it.

In today’s organisations, all three faces of power show up in strategic and subtle ways, for example:

• Visible power is the visible structure of the system that sits with formal leadership such as executives, budget holders, and boards. This type of power is clear, necessary, and trackable, but it is also often reactive.

• Agenda power lives with its gatekeepers that shapes system priorities. In the political world, this could be the chiefs of staff who decide who gets in to meet the president; it also includes respected insiders or the leaders of key projects such as dealing with a pandemic or a security issue. In the business world, they are the functional heads who shape the agenda inside their domains.

• Ideological power involves the informal dynamics that move the system. It is embedded in the business culture, in the lingo and language that is used, and the mythologies of what the business is about, why it is the best or even why the world is in a better place because the business is there. But it is also why some companies can’t read the signals and pivot, even when the writing’s on the wall.

A stalled transformation effort can be a good example of how these invisible powers play out. On paper, everyone’s aligned on the new strategy. But behind the scenes, there may be middle managers who keep “raising concerns”, putting up roadblocks or encouraging disunity with the direction of change. In situations such as this, it is the faces of agenda and ideological power that are doing counterproductive work.

So in moments of disruption or internal conflict, this model is helpful in unscrambling why formal authority alone wasn’t enough to overcome the other two dimensions of power.

How Teams Can Adapt the Model

Knowing that there is more than one face to power helps business leaders to take more control of the situation to better align with the business priorities.

Here are some thoughts on how to begin to apply Luke’s model explicitly in a business environment. These are practical ways to rebalance influence. And they reflect a growing awareness that managing power really means managing systems.

• Use stakeholder mapping tools to help track both formal and informal influence, that is to say who people listen to, trust, and follow.

• Organise agenda-setting rituals such as reverse town halls or open-priority weeks to create space for ideas to surface from within rather than the usual centres of control.

• Conduct culture audits; initiatives such as internal storytelling campaigns and norm-resetting activities help loosen the grip of ideological power, challenging what’s seen as acceptable or possible.

Power is Not Just Positional

In business, titles will still matter because good organisation needs a formal structure. But if we want to drive real change, we also need to see power as a system and read between the lines, to watch out for what’s not being said, to notice who’s shaping the agenda, and to constantly challenge the assumptions holding the system in place.

Last year, I made a short video about this topic on YouTube, which is available here:

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 September with a new format and focus.

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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There is never a dull day in business decision-making these days. It can sometimes feel like the system is disrupting everything, everywhere, all at once. Business leaders often describe volatility as the new normal. But volatility is only the surface expression of deeper system transitions.

Business decision-makers clearly face a dense network of increasingly interlinked risks, such as the ongoing energy shock emanating from the conflict in the Middle East. The conflict has driven up the international price of oil and gas in a relatively short period of time, discomforting balance sheets the world over. But there are also other risks to business operations, such as regulatory changes from carbon taxes to data localisation laws, changes to the terms of trade driven by geoeconomic considerations or significant digital disruption as AI increasingly embeds itself in everyday business operations and redefines the commercial landscape with new opportunities and emerging risks. Moreover, shifting consumer dynamics, from TikTok-driven product surges to Gen Z’s ESG preferences, means that sources of profit and growth should never be taken for granted.

This spectrum of risks reflects the constant interaction of political decisions, economic forces, social shifts, and technological breakthroughs. At its core is the question of how power drives structural change, which in turn drives the emerging trends in these areas. Understanding this interplay is at the heart of political economy, where markets and power often collide to shape new business realities and drive the next cycle of business headlines. Short-term noise gets a lot of attention, but what matters more is the underlying structural changes that generated it in the first place.

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The Need for Strategic Foresight

In an environment that feels more unstable and chaotic, it can be all too easy to focus too much on symptoms rather than causes. But such an approach makes finding a cure more difficult.

Scenario planning is one of the most effective ways for decision-makers to make sense of complexity. Applying it with systems thinking principles helps organisations not only to dynamically visualise how multiple factors interact, amplify, or counterbalance each other. It also helps to understand where change is emanating from and how reactions to emerging trends also feed back into reshaping the wider system. We may not be the biggest players, but sometimes small changes we make can also trigger larger changes later.

If we see our environment in systemic terms, we can see that the environment we are in is not separate from us. It is not a single external linear factor that drives today’s trends. We are also embedded actors, so our decisions and actions, as well as those of our partners and competitors, also feed back into the system. They help shape future scenarios.

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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:

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Regular readers of this newsletter know that change isn’t new, but its increased pace and scale are new in our society when compared with how we used to live and work just over two decades ago, at the start of this century. Technology is a big driver, but so too is politics, which is increasingly driving economic, environmental and public health outcomes. From financial crises to tariff-laden economic nationalism, from global health pandemics to the dawn of self-thinking AI machines, even the most well-run businesses need to adapt to the world we are rapidly becoming.

This is increasingly an age where transformation often happens out of necessity rather than by choice. Drivers of change in one area subsequently drive change in others. Just think of the political decisions to introduce lockdowns during the pandemic, which changed how many businesses use technology and manage risk for the long term. I know of a medium-sized financial services business that was completely caught off guard by the pandemic. Nobody was able to come into the office during lockdown; but staff only ever worked on desktop computers and could not work remotely, so the business could barely function. But within the space of a year, it went from a 20th-century operation to a 21st-century operation where everybody brings home their laptop every night just in case a new crisis locks the site down tomorrow. Some might describe this transformation as learning by doing, but reactively transforming in a crisis is demanding and costly for a business and its staff.

Transformation is a process that takes time, so it is better to start early. It requires dispensing with the old and building a new system of practices and mindsets, so that means having a good sense in advance of the direction of change. And if change is to be done in a proactive, forward-looking way, then that process will need a coalition of enthusiastic change agents on the inside who are willing to influence and sustain change efforts at every level of an organisation for a considerable period of time.

Change agents are an essential ingredient to successful transformation. They are nodes in a system where information, incentives, and behaviours flow. But they also operate with bounded constraints, so if they are to succeed, they need to be brave, have a clear roadmap, the right tools to manage risk, and, importantly (but sometimes forgotten), have the visible support from leadership above. The last point gives them credibility.

Reinventing an organisation is a collective effort, and the bigger the organisation, the more difficult it can be to create a sense of urgency, change the culture, break down barriers, and embed new ways of working. Yet with the right leadership and process, it can be done, as former IBM CEO Lou Gerstner describes in his 2002 memoir, Who Says Elephants Can’t Dance?

In this article, I’ll share a proven practical framework to help identify and empower those kinds of change agents within an organisation, so that when change is needed, it can take root and deliver what was originally intended.

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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

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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,

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