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

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. 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.

Why it matters

The Strait of Hormuz blockade is undoubtedly an energy shock, but it is also a stress test for the entire international economy. Businesses, investors, and policymakers must now confront the reality that geopolitical chokepoints can overnight disrupt trade, inflation, and economic growth, forcing a rethink of energy security and supply chain resilience strategies. Even if the war ended today, perceived risks to energy supplies from this critical region will likely remain embedded in higher prices.

Key details

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

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

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

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

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

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

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

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

Early this week, it was reported that French AI startup Mistral had secured $830 million (€720 million) debt financing from a consortium of seven global banks to build its largest AI data centre near Paris. The facility, expected to be equipped with 13,800 Nvidia GPUs, is set to open in Q2 2026 and represents Europe’s most ambitious attempt yet in the global AI race, which has so far been largely defined by US dominance in AI infrastructure. This development underscores the continent’s determination to achieve technological sovereignty as AI compute is increasingly seen as critical infrastructure. Still, it underscores the financial and energy risks of playing catch-up, and the chips are American rather than European-made.

Why it matters

AI compute is now a critical infrastructure like energy or ports. Mistral’s round of debt raising is a pivotal moment for European tech, proving the region can also mobilise the capital needed for large-scale AI infrastructure. It brings more competition to the AI race. However, the deal also highlights the urgency and fragility of Europe’s position: it must scale fast to compete with the US and China, but also faces energy constraints, talent shortages, and debt sustainability challenges that could limit its ambitions. France’s nuclear-heavy grid provides a clear edge for AI expansion, given data centres’ massive, continuous electricity needs.

Key details

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

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

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

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

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

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

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

• This announcement underscores growing investor confidence in European AI.

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

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

The Human Cost of the AI Gold Rush

The other side of the AI story is the creative destruction taking place in the labour market. Earlier this week, it was reported that Oracle had begun the process of laying off thousands of employees (reported to be up to 30,000 employees according to investment analysts, e.g. TD Cowen), roughly 18% of its global workforce, via pre-dawn emails, apparently without prior warning. While the company is yet to confirm publicly how many jobs were cut, they could rank among the largest in tech history. The move reflects a brutal but increasingly common trade-off: redirect resources from payroll to AI capex.

Why it matters

News of Oracle’s layoffs is a harbinger of the AI era’s impact on white-collar jobs. They signal that even profitable, established firms are willing to make drastic workforce reductions to fund AI transitions, a trend that will likely accelerate across tech and beyond. For businesses, this raises urgent questions about talent retention, reputational risk, and the ethical implications of AI-driven displacement. For policymakers, it signals the need for measures to manage AI disruption to workers in labour markets (their concern is that workers, who, unlike algorithms, vote and shape policy via elections).

Key details

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

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

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

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

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

CNBC WSJ The Next Web LA Times TechCrunch Inc

Strategy and Systemic Insight

This week’s signals reveal deep, interrelated trends quietly rewiring the international system.

Geopolitical Fragmentation

The Iran war and the Strait of Hormuz blockade should not be viewed in isolation; in systemic terms, they are symptoms of a broader unravelling of the post-Cold War order. This conflict is accelerating the fragmentation of global trade, energy, and data flows, with great powers and regional blocs increasingly setting their own rules. Businesses hear a lot about geopolitical risk at the moment. They must now operate in a “multi-aligned” world, where supply chains, data storage, and even talent pipelines are being regionalised for security.

What’s Next

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

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

Geopolitics Shifts the Energy Transition

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

The recent turn of events is likely to result in policymakers pursuing a dual push for renewables in the medium term and energy security in the short term, with governments subsidising LNG terminals, implementing windfall taxes, and stockpiling energy. We may even see the return of coal in some places. The result of this is likely to mean higher costs for energy-intensive industries, but it will also create opportunities in green tech and infrastructure.

What’s Next

• Energy supply chains: Firms in energy-intensive industries should assess exposure to Middle East supply routes and consider diversifying energy sourcing where possible.

• Watch for government announcements on LNG subsidies and renewable incentives in the coming weeks and months as the dual-push policy takes shape.

The AI Arms Race Reshapes Capital and Labour

Mistral’s debt raise and Oracle’s layoffs illustrate how AI is becoming the defining strategic asset of the 21st century. Mistral’s plan to use Nvidia chips means that for now, US chips will power Europe’s tech sovereignty bid, meaning that there is no getting around global supply chains in the search for independence, at least on the hardware side.

Firms, particularly in software (as we saw this week), are redirecting capital from labour to infrastructure at an unprecedented scale, while governments (especially in Europe) are intervening to ensure tech sovereignty. This shift should be expected to polarise labour markets. All indicators suggest that high-skilled AI-augmented roles will thrive, while mid-skilled jobs face displacement, as is currently happening. The sweet spot for business strategy is getting the balance right between AI investment and workforce resilience.

What’s Next

• Q2 2026: Monitor Mistral’s data centre launch, delays or technical issues could spook investors. A successful launch could increase confidence.

• Policy moves: Expect EU subsidies or regulatory support for “sovereign AI,” including data localisation requirements or cloud tax incentives.

• Energy debates: The centre’s power demands will fuel discussions about grid capacity and sustainability, potentially accelerating renewable and nuclear energy measures in France.

• Industry trend: It should be expected that more tech firms will use layoffs to fund AI, or, in some cases, perhaps the cover of AI to justify layoffs.

Volatility as the New Normal

The wild market swings of the past week increasingly seem like the new baseline. Geopolitical shocks, tariff wars, and central bank policy shifts should be expected to override traditional economic indicators, forcing businesses to adopt agile financial planning, scenario-based strategies, and hedging tools to survive.

What’s Next

• Central bank signals from the Fed and ECB will be significant. Any deviation from expected rate paths could trigger outsized market reactions in an already volatile environment.

• US trade policy announcements in Q2 remain a key wildcard for business planning and supply chain costs.

Thoughts for Strategy

• Resilience, Not Just Efficiency: The era of just-in-time globalisation is over; just-in-case regionalisation is the game now. Thus, supply chains, workforces, and financial structures must be stress-tested for geopolitical and climate shocks.

• Invest in AI but Mitigate the Risks: AI investment is non-negotiable, but the winners will be those who invest in their workforce alongside their infrastructure, not instead of it.

• Scenario Plan for Extreme Volatility: The range of possible futures is widening. That requires mature reflection and planning. Modelling best and worst-case scenarios for war, inflation, and tech disruption, and building the agility to pivot quickly, is time well spent.

• Watch the Energy-Geopolitics Nexus: The Iran war is perhaps a preview of how energy security will dominate corporate and government agendas for the next decade. We are at an inflection point where the old world order is passing, and the new order is not yet born. Businesses in energy-intensive sectors should lock in long-term contracts, diversify suppliers, and invest in renewables.

What I am Reading

Nicu Popescu and Alan Riley wrote an interesting piece this week for the ECFR on how Europe can power the AI revolution and stay competitive. They argue that those countries that can build electricity power systems the fastest will shape the AI era, and those that don’t will fall behind. Europe has some real structural advantages. It should pursue a programme of “fast energy”. Fast energy: How Europe can power the AI revolution and stay competitive – European Council on Foreign Relations

The American Political Scientist, Stephen Walt, argues in the current edition of Foreign Affairs that Donald Trump’s second-term foreign policy represents a shift toward “predatory hegemony”, a strategy in which the United States uses its dominant position not to build stable, mutually beneficial international relationships, but to extract concessions, tribute, and deference from allies and adversaries alike in what it sees as a purely zero-sum world. It is doomed to fail. The Predatory Hegemon | Foreign Affairs

Yonatan Touval, a foreign-policy analyst and writer, argued in The New York Times this week that the U.S. and Israeli leadership, despite extraordinary intelligence and targeting capabilities, have waged a war on Iran with a dangerous blindness to human meaning, historical memory, and cultural narratives. It is a failure of imagination that Clausewitz, Shakespeare, and Tolstoy would have recognised as a source of strategic misjudgement. Opinion | Is It 1914 in America? - The New York Times

Penelope Crossley, Danielle Kent, Glenn Platt and Lee White argue in Harvard Business Review that energy volatility has become a strategic issue, not a routine procurement concern. Most firms still behave as if energy were predictable and outside managerial control. That mindset is now dangerous. How Leaders Can Get Strategic About Energy Costs

One Last Thing

With the continued de facto closure of the Strait of Hormuz this week, a route that normally carries 25%–30% of global oil, 20% of LNG, and one‑third of global fertiliser shipments, together with the damage done to regional infrastructure, it has created the largest disruption to the global oil market in its history.

The IMF, in a director’s blog this week, painted a picture in which the ongoing war could affect the global economy in several ways, much of it still uncertain, but with the direction of travel toward higher prices and slower growth. Supply chains are also being disrupted, with knock‑on effects on food and other critical inputs, while financial markets have sold off, though to a lesser extent than past global shocks, yet still tightening financial conditions worldwide.

Source: IMF Blog, March 2026.

For those watching the intersection of conflicts, trade, and finance, this is another reminder that our economic world is still deeply wired through just a few narrow, fragile chokepoints. The fact that these developments are being closely monitored by the IMF, the institution tasked with fostering global financial stability and sustainable growth, tells us this is not just a regional Middle East “event,” but a systemic pressure point (and one that will test institutions and policymakers alike in the coming weeks and months).

Read the blog in full here: How the War in the Middle East Is Affecting Energy, Trade, and Finance

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Key Signals

EU and Australia Free Trade and Security Agreement

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

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

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

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

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

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

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

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

– Australian Prime Minister Anthony Albanese

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

- European Commission President Ursula von der Leyen

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

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

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

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

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

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

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

Strategic and Systemic Insight

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

Read more

Top Signal: Middle East Escalation Further Disrupts Energy Markets

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

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

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

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

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

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

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

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

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

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

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

Key Signals

Central Banks Hold the Line Amid Uncertainty

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

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

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

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

Markets are beginning to sense this tension.

Read more

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.

Read more

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 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

Strategy and Systems Insight

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

Strategy and Systems Insight

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

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

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

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

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

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

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

Referring to Secretary Rubio’s speech, she said:

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

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

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

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

“Europe has to become a geopolitical power”

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

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

The Chancellor said he agrees with the sentiment that Europe:

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

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

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

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

and also called for:

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

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

India Positions Itself as a Global AI Hub

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

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

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

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

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

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

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

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

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

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

Supreme Court Strikes Down Trump’s Tariffs

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

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

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

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

Strategy and Systems Insight

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

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Top Signal: EU Leaders Brainstorm in Belgium to Boost Competitiveness

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

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

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

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

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Renewed EU Push for Economic Resilience

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

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

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

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

The Buy-European Procurement Tilt

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

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

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

Japan’s Supermajority Signals Policy Realignment

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

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

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

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

Strategy & Systems Insight

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

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Top Signal: India-US Trade Announcement

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

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

Key Signals

New Critical Minerals Trading Bloc

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

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

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

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

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

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

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

Key Signals

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

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

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

EU Signals Economic Reforms Amid Competitiveness Crunch

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

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

Carney’s Middle-Power Manifesto

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

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

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

Strategic and Systems Insight

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Top Signal: Strengthening The European Industrial Interest

There was evidence this week of pragmatic realism in EU responses to global uncertainty shaping its outlook and decision-making.

In a speech in Madrid this week, Luis de Guindos, Vice-President of the European Central Bank, warned of a shift to a new paradigm where the erosion of the multilateral, rules-based system, which has long supported global trade and international relations, is leading to one where rule of law principles are challenged. With domestic demand seen as the main engine of growth in the coming quarters, he said that the global economy is facing a period of profound transformation and heightened uncertainty and that the only viable path forward is promoting stronger cooperation and deeper integration within Europe.

Meanwhile, in Brussels, the EU Commission this week published a new guidance document regarding its imposition of tariffs of up to 35% on imports of battery EVs from China. The main elements of this additional guidance, which is reportedly intended to provide “a very clear framework,” address the potential for a Minimum Import Price based on a non-subsidised price, an annual cap of vehicles to be imported, and a commitment to significant BEV-related investment projects in the EU. While this development has been reported as welcomed by China, it also signals a leveraged negotiating position by the EU. ECB EU News European Commission

Key Signals

Fed Under Pressure

We learned this week that the US Department of Justice served the Federal Reserve with grand jury subpoenas, probing Chair Jerome Powell’s June 2025 Senate testimony regarding headquarters renovations, where reported costs escalated to $2.5 billion. In an extraordinary video made public Sunday, Chair Powell said, “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President”.

These developments highlight tensions testing Fed independence, a public good, which has allowed it to make monetary decisions in the long-term interest of US economic stability rather than serve short-term political goals. When independence is threatened, investors tend to demand a “term premium,” that is to say, they charge the government, and by extension, consumers, more interest on long-term loans because they fear their money will be worth less in the future. The financial markets ultimately depend on trust; if it is lacking, the price goes up. While the Fed’s defiant response signals institutional resilience, vigilance is also warranted. A lack of independence at the Fed could also have repercussions for the global economy.

The latest development follows a decision last September by the Justice Department to probe into Governor Lisa Cook over mortgage fraud allegations. Chair Powell’s term ends in May 2026, though he could remain in his role as a governor until 2028. Markets are watching for potential nominees that could be appointed as the next chair and trying to decipher what that means for the institution’s independence in the coming years. Fed WSJ NYT

The Risk of Geoeconomic Confrontation

This week, the influential Global Risks Report from the World Economic Forum, which is based on the insights of over 1300 experts worldwide, identified economic confrontation as the top risk most likely to trigger a material global crisis in 2026, ahead of State-based armed conflict. This risk is expected to deepen as governments continue to use economic tools in the service of national security goals. That means multilateralism and multilateral institutions such as the World Trade Organisation will likely face ever stronger headwinds as rising evidence suggests the decline of the rules-based international order. The rise of realpolitik on the global stage could mean that those countries least able to back up their interests with credible deterrents could lose out. WEF

Arctic Friction in the Transatlantic Alliance

The foreign ministers from Denmark, Lars Lokke Rasmussen, and Greenland, Vivian Motzfeldt, were at the White House in Washington this week for a high-stakes meeting with Vice President J.D. Vance and Secretary of State Marco Rubio to discuss President Trump’s wish to acquire the Arctic island, which is an autonomous country within the Kingdom of Denmark.

The Danes and the Greenlanders want to preserve the status quo, but President Trump has insisted that the US needs to acquire the mineral and resource-rich country for security purposes, arguing that the Danes can’t defend it against the Russians or Chinese, who have an interest in the Arctic region. The President has said that the acquisition is needed for his proposed “Golden Dome” missile defence system.

Premeeting rhetoric suggesting that “utilizing the U.S. Military is always an option”, which, even just to suggest it, tests rhetorical norms with a loyal NATO ally. However, the Danish defence minister is reported to have called a potential US attack on Greenland “completely hypothetical”. This week, several European NATO countries deployed small numbers of military personnel to Greenland at Denmark’s request, but it was reported on Friday that President Trump had threatened tariffs on countries that do not support his plan to acquire Greenland.

It is not clear why the Americans need ownership, as should the island be attacked, Article 5 of the NATO charter would require the US to come to the defence of its Danish ally in any case. Moreover, the US already has a military base in Greenland. What is clear is that the ambitions of the US president are not going away any time soon. European and U.S. tensions over Greenland and Arctic resource control reveal real tension in the NATO alliance. The “frank but constructive” talks in Washington this week established a working group amid fundamental disagreement. Recent polling suggests most Americans oppose US control of Greenland. NYT WP Le Figaro The Guardian CNN BBC ABC

Strategy and Systems Insight

This week’s signals suggest the rules-based international order is now under significant pressure, with power-based economic logic gaining ground. The international systems seem to be in transition.

Across Europe, the United States, and the Arctic theatre, the logic of power is challenging the logic of markets. Institutions that once acted as stabilisers in the international system are increasingly becoming arenas of contestation, reflecting deeper system-level stress. However, it is important to point out that this shift is uneven, and there are also countervailing forces, such as diplomatic negotiations, that also remain in play.

The European Union is navigating

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Top Signal: EU Provisional Approval of the Mercosur Trade Deal Despite Political Polarisation

This week, the European Union’s long-negotiated trade agreement with the South American Mercosur bloc (Brazil, Argentina, Paraguay, Uruguay) was given the green light by EU ambassadors after decades of negotiation, even as member states, including France, Ireland, Austria, Hungary, and Poland, reportedly voted against it, and widespread farmer protests erupted on EU roads. It was approved by member states with a qualified majority and now moves for signing and then approval by MEPs in the European Parliament.

The deal is set to create the world’s largest free trade area, covering some 700 million people. It will help reduce EU dependence on China and the U.S. for key inputs such as critical raw materials, which are much needed by EU manufacturers in industries such as electric automobiles, aerospace, and defence.

However, despite moves by Brussels to address their concerns, European farmers fear cheap agricultural imports from South America will depress rural incomes and accelerate structural decline in local food systems. They have also raised questions about different food standards and have demanded that imports meet the same standards as EU produce. On the other hand, it should be expected that cheaper food imports translate into lower prices for EU consumers.

Meanwhile, EU firms will face no discrimination in investing in Mercosur’s industries. On the political level, the internal EU divisions on display this week signal deeper tensions between globalisation strategies and the protection of local stakeholders on the continent. However, while these divisions clearly exist, if the deal is approved by the European Parliament, it will be a significant geoeconomic win for the EU on the global stage. Politico RFI RTE Reuters The Pigsite Euroactiv EU Commission EU Council

Key Signals

Transatlantic Strains

In recent days, the French and German presidents publicly criticised the U.S. under President Trump, accusing Washington of distancing itself from its allies, warning that Washington is “breaking free from international rules” and that the world risks becoming a “den of robbers”, where global democracy is being attacked as never before. Their comments have been widely interpreted as reactions to both the US raid in Caracas that captured Nicolás Maduro and Trump’s renewed, more aggressive push to assert control over Greenland, which European leaders view as undermining allied sovereignty and international norms. EU leaders have publicly warned against any unilateral US move regarding Greenland and stressed that “Greenland belongs to its people” and decisions are for Denmark and Greenland alone.

This is a signal of allied cohesion under stress. European capitals still depend on the US for security guarantees in Europe, but are also beginning to recalibrate their strategic alignment with the U.S., opening space for deeper EU strategic autonomy. It’s a difficult balancing act. In such an environment, geopolitical risk from fractures in NATO and Western diplomatic unity can ripple through to investment confidence and the security of supply chains. France 24 Independent CNBC NPR IFRI

Future Jobs Scenarios in the AI Economy

This week, the World Economic Forum (WEF) released a major white paper outlining four AI-driven futures for jobs by 2030, but only one (“Co-Pilot Economy”) suggests pragmatic integration, which balances productivity with job resilience, while the others point toward displacement, inequality, or concentrated gains.

Economies worldwide must prepare for a profound transformation of labour markets, skills needs, and employment contracts. AI adoption strategies, from re-skilling to regulation, will determine whether nations will be able to capture productivity gains or, on the other hand, exacerbate levels of inequality and political polarisation within the next few years. WEF

Eurozone Economic Stability But Structural Constraints

New data released this week from Eurostat, the statistical office of the European Union, showed that the Eurozone ended 2025 with inflation easing to about 2%, supporting stability. However, growth forecasts are modest, and structural headwinds persist.

With inflation near target, the European Central Bank should be expected to keep rates steady, helping to stabilise borrowing costs. However, sub-1.5% growth forecasts by analysts and structural rigidities could slow job creation, wage growth, and investment. Eurostat Conference Board KPMG Goldman Sachs

Systems & Strategic Insight

These signals are not isolated events; rather, they reveal interlocking structural shifts in how Europe, in particular, confronts global markets, technology, and power.

The Mercosur deal is a case study in how economic openness can also generate political backlash domestically. But the resistance from European farmers isn’t just political noise; it is also the feedback loop where gains in capital-intensive sectors such as EV inputs come at the expense of traditional labour markets in agriculture. Without targeted support mechanisms, trade liberalisation runs the risk of fueling political polarisation.

Meanwhile,

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Top Signal: China’s Record $1 Trillion Trade Surplus, As IMF Warns About Exports

This week, we learned that China’s annual trade surplus surpassed $1 trillion for the first time, underscoring its global export dominance despite slowing shipments to the key U.S. market and tariff pressure. Exports to other parts of the world, including the EU, Southeast Asia, and Africa, surged, reflecting shifting trade corridors and its resilient manufacturing capacity.

However, in a major institutional signal, the IMF urged China to curb overreliance on exports and shift toward domestic demand and social consumption as a policy priority. The Fund, which has upgraded its projections for China’s growth to 5% in 2025 and 4.5% in 2026, warned that sustained external surpluses could further global trade tensions. The Fund said that “China is simply too big to generate much growth from exports” and called for greater urgency in tackling domestic imbalances, implementing structural reforms, and addressing high domestic debt levels. WSJ IMF Reuters

Key Signals

U.S. Federal Reserve Cuts Rates Amid Economic Ambiguity

The U.S. Federal Reserve lowered interest rates for a third consecutive time this week by 0.25% to the 3.5% to 3.75% range, citing weakening labour data and uncertain inflation trends. Yet the move was not unanimous, with one governor among the twelve-person Federal Open Market Committee preferring to lower the target range for the federal funds rate by 0.5% and another preferring no change. It was reported this week that officials expect interest rates to remain just above 3% through the end of 2028. The Fed seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. Federal Reserve NYT

UK’s Youth Employment Crisis Deepens

A new report out this week signals that the UK has slipped down the youth employment rankings of advanced economies, with three million young people in Britain not in education, employment, or training. This is the highest level since 2020 and the steepest decline in the G7. There was growing alarm reported amongst UK ministers as the 16 to 24-year-old category has climbed to almost a million. In contrast, Switzerland, Iceland, and the Netherlands topped the 2025 Youth Employment Index conducted by PWC. The Guardian PWC

U.S. – Venezuela Tensions Escalate Over Oil Tanker Seizure

This week, U.S. forces seized a large Venezuelan oil tanker allegedly transporting sanctioned crude, in a significant escalation of US pressure on the country, prompting Caracas to accuse Washington of “an act of international piracy”. The confrontation adds strain to hemispheric diplomacy and highlights the persistence of energy politics as leverage. Venezuela is reported to have the world’s largest proven oil reserves, exporting a daily average of about 900,000 barrels. It produces heavy oil, the type most suitable for American refineries. WP The Guardian Sky News

Systems Insight

This week’s key signals are a snapshot of a world trying to find balance between change and resistance, where each reveals how economies, institutions, or governments cope with growing complexity.

China’s record $1 trillion trade surplus, paired with the IMF’s call for domestic rebalancing, reveals a world economy locked in structural dependency. The global system still relies on Chinese exports to sustain growth while hoping China will consume more at home to stabilise global demand. It’s a paradox of interdependence where what drives stability also tends to deepen fragility.

Meanwhile, the Fed’s third consecutive rate cut shows that policy calibration has become…

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Top Signal: Private Markets Stress Tested by Bank of England

This week, the Bank of England (BoE) announced a new system-wide exploratory scenario (SWES) to stress test private markets, targeting the fast-growing private equity (PE) and private credit (PC) sectors that now manage around US$16 trillion globally.

This exercise aims to map how a severe but plausible global downturn could ripple through non-bank finance, how banks, institutional investors, and alternative asset managers would react, and whether those reactions could amplify stress across the broader financial system and real economy.

This is significant because over the past decade or so, private-market finance has become a core source of corporate funding, underwriting debt, leveraged buyouts, and long-term investment, meaning that any liquidity squeeze could quickly spill into the real economy.

This week’s initiative from the BoE is a part of a broader global regulatory trend signalling an evolving phase of heightened scrutiny, disclosure demands, and potential reforms for the private-equity and credit ecosystem.

Recent research by the Bank for International Settlements (BIS) highlights that the rapid growth of private credit has created structural vulnerabilities, including opacity, concerns about loan valuations and ratings, and growing concentration and interconnections, which could allow stresses in this market to spill over into the broader financial system. Bank of England BIS

Key Signals

Global Economy Remains Fragile Despite Resilience

Earlier this week, the Organisation for Economic Co-operation and Development (OECD) published its latest global economic outlook, which has signalled that while the world economy has shown resilience in 2025, underlying fragilities remain. Growth is forecast to slow from 3.2% in 2025 to 2.9% in 2026, with a modest rebound to 3.1% in 2027.

Growth projections for major economies are weak, with growth dipping in the US from 2.0% in 2025 to 1.7% in 2026 and 1.9% in 2027. Growth is projected to largely stagnate in the euro area, expected to be 1.3% in 2025, 1.2% in 2026, and 1.4% in 2027. Even China, which has long been the engine of global growth, is expected to decelerate from 5.0% in 2025 to 4.4% in 2026 and 4.3% in 2027.

The organisation signalled in its outlook that risks remain, including “the prospect of further trade barriers, a potential sharp repricing of risk in financial markets, potentially amplified by stresses in leveraged non-bank financial institutions and volatile crypto-asset markets”. OECD

Macron Calls For Trade Rebalancing and Global Cooperation During His State Visit to China

French President Macron met Chinese President Xi Jinping in Beijing this week and urged China to help correct “unsustainable” global trade imbalances and to support efforts toward peace in Ukraine. The discussions covered trade, critical minerals, export restrictions, and supply-chain stability. A 12-point cooperation agreement was also signed; however, no major industrial orders (e.g., for Airbus aircraft) have materialised at this stage. This visit underscores the European attempt to recalibrate its economic dependence on China by pushing for fairer trade, strategic diversification, and industrial sovereignty, while, at the same time, navigating geopolitical tensions regarding issues such as Ukraine, US-China competition, and access to critical minerals. Reuters Euronews Al Jazeera

Systems Insight

When taken together, this week’s key signals illustrate a broader systemic tension where the global economic–financial system is entering a phase where multiple weak links could interact and produce non-linear, systemic stress.

• Private-market finance has evolved into a powerful but still opaque node of corporate financing. The BoE’s stress test

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Top Signal: EU–AU Summit Signals Deepening Co-operation Between Europe and Africa

This week, the 7th EU–AU Summit, held in Luanda, Angola, brought together the leaders of the European Union (EU) and the African Union (AU) and produced a new joint declaration aimed at deepening cooperation across trade, migration, security, development, and governance. The summit reaffirmed commitments under the “Joint Vision 2030,” which is aimed at enhancing economic development, security, and sustainable growth. It renewed emphasis on multilateralism under international law, signalling a recalibration of Europe-Africa ties, with greater recognition of Africa not just as a developmental recipient, but as a strategic partner in geopolitics, resources, migration, and trade. Notably, the agenda included cooperation on critical minerals (relevant to global supply chains and the green transition), migration flows, security coordination, and sustainable development, positioning Africa as a central node in resource, trade, and geopolitical realignment. Moreover, to increase trust in the growing relationship with the continent, the Europeans have also formally signalled in the joint declaration their profound regret about “the untold suffering inflicted on millions of men, women and children as a result of the slave trade, colonialism and apartheid”. EU Council African Union

Key Signals

G20 Summit Concludes in South Africa

As noted last week, the G20 summit took place in Johannesburg, South Africa, the first time such a summit has been held in Africa. The group includes the world’s major economies, representing 85% of global Gross Domestic Product, over 75% of international trade, and about two-thirds of the world population. The outcome saw affirmed commitments to inclusive growth, sustainability, and a stronger voice for Global South economies, reinforcing multilateral dynamics amongst the world’s biggest economies. The momentum from this summit, combined with the EU–AU summit, suggests an ongoing trend in which global governance and economic architecture are being rebalanced in several ways away from traditional Western/Northern dominance toward an arguably more multipolar, multi-regional array of influence. G20

Global Workplace Restructuring

The global workforce continues to signal signs of restructuring as global businesses continue to cut jobs, especially in sectors like tech, as firms adapt to slower growth, macroeconomic uncertainty, and rising cost pressures. HP is the latest global company to announce significant layoffs, announcing its aim to eliminate between 4,000 and 6,000 jobs in order to save $1 billion over the next three fiscal years as it invests further in artificial intelligence. The move follows previous similar announcements by Amazon and Microsoft.

Moreover, recent data show sustained layoffs and rising concerns about “ghost working” and “ghost workloads” where employees mentally disengage, appearing busy but quietly job hunting during work hours, or take on increasing responsibilities without corresponding rewards or career advancement. All of this is happening at a time when the nature of work continues to shift, where remote and hybrid arrangements are being complemented by deeper integration of digital workflows and AI-mediated collaboration systems. WSJ Investopedia Forbes

UK: Fiscal Tightening, Redistribution, and Investor Signalling

This week, the UK government unveiled its 2025 Autumn Budget, confirming a significant fiscal tightening which is expected to reduce the current budget balance deficit from £28.8bn in 26/27 to a surplus of £24.6bn in 30/31. Net financial debt is expected to be 83.3% in 26/27, but 82.2% in 30/31. The UK is the world’s 6^th largest economy. The Budget’s goal is to stabilise public finances, reduce living costs, and create fiscal space for social investment. However, some analysts caution that it will lead to lacklustre growth and stagnating living standards. Key measures include plans to better support entrepreneurs, retention of the corporate tax rate (the lowest in the G7), spending of 2.6% of GDP on defence by April 2027, higher taxes on investment income, pension relief cuts, a new mansion tax on properties over £2 million, and a multi-year income tax and national insurance threshold freeze. These are changes that effectively raise the tax burden for many middle-income earners. HM Treasury World Bank The Times

Systems Insight

When viewed together, this week’s key signals illustrate a cascading reconfiguration of international systems where governance, economics, labour markets, and fiscal regimes are driven by overlapping pressures that include geopolitical realignment, resource and supply-chain shifts, technological disruption, and fiscal stress.

The EU–AU Summit and G20 repositioning reflect an emerging systemic rebalancing of global governance and trade architecture where new nodes of influence (Africa, emerging markets) are becoming more prominent. This could reshape global supply chains,

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Top Signal: IMF Warns of the Slowest G20 Expansion Since 2009

This week, the International Monetary Fund projected that G20 economies will grow by just 3.2% in 2025, and this growth is expected to slow even further to 3.0% in 2026. Medium-term growth is projected at 2.9% which would be the weakest medium-term trajectory since the global financial crisis. In its report to the G20, it points to rising protectionism, public-debt burdens, demographic challenges, and political uncertainty as core drags on productivity and trade. It said that international cooperation has an important role to play in restoring confidence, predictability, and growth prospects.

G20 leaders are due to meet in South Africa this weekend. However, it has been reported that political leaders from several member countries, such as the US, China, and Mexico, are not planning to attend the gathering. IMF Reuters

Key Signals

Europe’s Strategic Divisions Over Ukraine

At the EU foreign ministers’ meeting this week, there was resistance to a US-backed plan to end the war in Ukraine, reportedly being drafted behind closed doors with Russia. First reported in US media, it apparently includes terms that would be highly disadvantageous for Ukraine. Meanwhile, member state Hungary has called for halting EU funding to Kyiv after corruption reports. Euronews Reuters

EU Growth Exceeds Expectations, But Headwinds Remain

Staying with Europe, the European Commission announced this week that economic growth exceeded expectations in the first nine months of 2025, with real GDP growth outperforming the projected annual expansion announced in the spring, as exporters looked to get ahead of tariffs and significant investments were made in equipment and intangible assets. This outcome was also supported by a resilient labour market, decreasing inflation, and favourable financing conditions.

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Top Signal: COP30: Progress Made, But Gaps Remain, Amid a Power Shift

The 30th UN Climate Change Conference (COP30) began in Belém, Brazil, this week, amid mounting pressure on countries to increase their commitments to emissions cuts and climate finance. This week saw the conference focus on the health impacts of climate change, with the adoption of the Belém Health Action Plan with the aim of integrating health into climate strategies. Also, this week, 12 countries, including Brazil, Canada, France, Germany, and Spain, pledged to fight back against climate disinformation and to protect journalists, scientists, and researchers. There were also discussions on technological innovations that could help accelerate climate solutions. But the key signal from the UN this week was that the emissions curve has been bent downwards, but there still has not been enough progress to guarantee the goal of limiting the increase in global average temperature to 1.5°C. Significantly, there was also a reported shift in the centre of gravity of green-industrial power, where China’s industrial policy is increasingly driving global green energy solutions, at a time when the Trump administration in Washington is reportedly intending to withdraw the United States from the annual climate talks. The outcomes from this summit will shape the pace and credibility of global climate action for years.​ UN UN+1 UN+2 UNFCC NYT

Key Signals

US Monetary Policy Uncertainty

Officials at the US Federal Reserve are reportedly signalling less conviction on imminent rate cuts, citing persistent inflation and a still-robust labour market. Market expectations for cuts in December have now reportedly dropped below 50%. Meanwhile, the longest-ever U.S. government shutdown has ended, but the backlog and data fog will delay clarity on economic indicators, which may be a significant factor in December’s rate decision in the world’s largest economy. Reuters The Economic Times

EU Announces a Democratic Shield

This week, the European Commission unveiled a major package of measures to strengthen democratic resilience across member states and candidate countries. The move comes amid rising internal and external pressures, including disinformation campaigns from authoritarian states aimed at eroding public trust and fueling division. It is the bloc’s most comprehensive effort yet to counter information manipulation, disinformation, hybrid threats, and foreign electoral interference.

Building on the Digital Services Act and the AI Act, the plan introduces a European Centre for Democratic Resilience, a fact-checking network, and new election-observation protocols. It aims to increase defensive coordination among member states and candidates, bolster the media sector’s economic resilience, and enhance protections for journalists and politicians. The Democratic Shield is expected to be integrated into the EU’s 2028–2035 long-term budget.

For the business community, the Democratic Shield should be expected to strengthen the information and institutional environment they depend on by reducing disinformation risks, stabilising regulatory expectations, and creating an overall more predictable operating climate across the single market. EU Commission Alde

Systems Insight

These key signals that I am focusing on this week illustrate the entanglement of geopolitical power shifts, systemic risk interdependencies, and the governance adaptations underway that significantly define the contemporary global system’s political economy.

The COP30 summit in Brazil this week highlights an accelerating shift

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Top Signal: Markets Raise Concerns About Potential AI Bubble

This week, the scramble for AI computing power collided with market volatility. The intense demand for AI chips, components, and infrastructure has driven a surge in investment. However, this rapidly growing sector is also experiencing amplified market volatility as prices and valuations adjust in response to macroeconomic conditions, investor behaviour, and supply bottlenecks. This week, stock markets looked like they were “on the verge” of a correction as volatile trading wiped $500bn off the value of AI chipmakers. Meanwhile, this week it was reported that Michael Burry, the investor who famously predicted the subprime mortgage bubble nearly two decades ago, is betting that two key AI stocks will decline. We may be in an AI bubble, but the chief executive of one of those key stocks, Jensen Huang, of Nvidia, suggested this week that we are in the beginning of the “build-out” phase. Meanwhile, the chief executive of the other, Alex Karp of Palantir, reportedly criticised Burry and other short-sellers for questioning the AI revolution. Yahoo! Finance, Digit WSJ The Times The Guardian

Key Signals

OpenAI–AWS Megadeal

Related to this week’s top signal is the multibillion-dollar multi-year deal announced this week within the AI sector, in which OpenAI has confirmed it has signed a seven-year, $38 billion deal to buy cloud services from Amazon Web Services. The deal will give OpenAI access to hundreds of thousands of advanced Nvidia graphics processors and can help it cement hyperscale power. Some estimates suggest the company has agreed on about $1 trillion worth of infrastructure deals in 2025, including a project with Oracle and Softbank. These developments come ahead of reported plans of an IPO on the stock market, but there are also reports that some on Wall Street have questioned how the loss-making company is going to pay for the deals it is currently making. Reuters Le Monde

OPEC+ Restraint

Eight OPEC+ countries (Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman) announced this week that they will slightly increase oil production in December (by 137,000 barrels per day) before pausing production increments in the first quarter of next year (due to seasonality), following their assessment of global market conditions and outlook at their virtual meeting. Overall, the price of a barrel of oil was fairly flat this week, with Brent Crude trading at just over $64 a barrel on Friday morning. OPEC Market Watch

EU Enlargement Report

With a growing list of neighbouring candidate countries in recent years that want to join the world’s largest multinational political union and trading bloc, the EU Commission announced that significant progress has been made on that path by Montenegro, Albania, Moldova, and Ukraine. Meanwhile, the candidacy of other countries such as Georgia, Serbia, and Turkey remains stalled. The Commission also signalled that future Accession Treaties will need stronger safeguards to avoid any backsliding on commitments made by candidate countries when they become members. EU Commission

Systems Insight

This week reveals a deeper truth about modern systems in the sense that scale is both the engine and the exposure. It drives growth, but it also generates vulnerability. The markets have shown new signs of unease about a potential AI bubble,

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Top Signal: Managing Instability Through Interdependence

This week, US President Trump’s Asia tour, which included his face-to-face meeting with Chinese President Xi Jinping in South Korea, resulted in a temporary truce in the trade war. Among the key agreements, the U.S. committed to lowering tariffs on Chinese goods in exchange for continued access to rare earth minerals for a limited period. China also agreed to resume purchases of American soybeans and to enhance cooperation on counternarcotics. Later, South Korea announced it had reached an agreement on a trade deal with the U.S., including concessions following months of negotiations, with lower import tariffs on South Korean goods entering the U.S. and significant planned investments in American industries, including shipbuilding. Euronews NYT WSJ CNBC

Key Signals

World’s Major Central Banks Make Interest Rate Decisions

The US Federal Reserve this week decided to reduce its federal funds rate by 0.25% to the 3.75% to 4% range, at a time when available economic indicators suggest that job gains have slowed, the unemployment rate edged up, and inflation remains elevated. It emerged from the news conference following the Fed meeting on Wednesday that a rate cut in December is far from baked in. It also signalled an end to quantitative tightening in December. Meanwhile, in the Eurozone, the ECB Governing Council decided on Thursday to maintain key interest rates at current levels of between 2% and 2.4% as inflation remains close to the 2% target and the economy continues to grow. Meanwhile, the Bank of Japan also maintained its short-term interest rates at 0.5% as the economic outlook looks modest and the elevated consumer price index is likely to decelerate to below 2% through the first half of 2026. Fed ECB BOJ WSJ

EU-India Signal Free Trade Deal to be Ready by Year’s End

The European Union and the Indian government have signalled optimism of concluding their long-running Free Trade Agreement negotiations by the end of 2025, following three days of intensive high-level meetings in Brussels this week. An EU delegation is expected in New Delhi next week to finalise technical negotiations. The EU is India’s second-largest trading partner, while India is the EU’s 9th-largest trading partner. In September, the EU set out a new strategy to reinforce prosperity and security with India. Times of India EU Trade Data EU Commission EU Commissioner Šefčovič on X

Relative Win for Libertarianism in Argentina

In the mid-term elections, Argentina’s President Javier Milei saw his libertarian party, La Libertad Avanza, strengthen its representation in parliament, winning about 40 % of the vote and securing enough seats to protect presidential vetoes and advance his free-market agenda. The result gives him greater legislative leverage, though he still lacks an outright majority and must build alliances to pass laws. It also signals that many Argentinians are not yet ready to abandon their economic experiment, or to return to Peronism.

In Washington, Milei’s reforms have drawn close attention. Earlier this month, the Trump administration said it was willing to support Argentina’s peso through a mix of sovereign and private-sector financing. President Trump reportedly hinted that such aid could depend on Milei’s electoral performance.

Milei, a free market economist and self-described anarcho-capitalist, rose to power in 2023 while still a political novice with no executive experience. Economists and analysts are now watching whether his radical market reforms can succeed and whether similar libertarian experiments could or should be replicated elsewhere. WSJ Le Monde AP CATO

Systems Insight

This week points to a world managing instability through interdependence.
Trump’s Asia tour produced a fragile truce, built not on trust but on mutual necessity. The U.S. gets its rare earths, China secures food imports, and South Korea leverages the moment to lock in its own industrial advantage. This is diplomacy as systems maintenance, but it is not transformation.

Meanwhile, the world’s major central banks are diverging carefully. The Fed’s small rate cut and end to quantitative tightening suggest a pivot to “controlled easing,” while the ECB and BOJ are standing firm. Together, they signal a shift from coordinated global monetary cycles towards adaptive pragmatism, with each managing domestic risks within a fragile global frame.

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