Welcome to this week’s edition of Geopolitics & the Day After. As developments in the Middle East continue to unfold, we have limited this week’s briefing to the geopolitical and geoeconomic dynamics shaping the global landscape. Below is an overview of what we cover this week:
Geopolitical Concerns dives into how the war with Iran is reshaping regional and global geopolitics and is unlikely to produce stability, instead creating prolonged uncertainty around Iran’s future, Gulf security, and great‑power competition.
Geoeconomics examines how global markets are being shaken by Middle East conflict–driven energy disruptions on top of existing stresses from inflation, tightening credit, technological upheaval, and rising volatility, raising fears that the global economy is entering a more persistently unstable and volatile phase.
Geopolitical Concerns
How the latest regional conflict is reshaping the Middle East
Economist
The Mirage of a New Middle East
Dalia Dassa Kaye, Foreign Affairs
How China’s enormous bet on Iran failed
Miles Yu, The Washington Post
There Is No Iran Endgame That Doesn’t Risk Chaos
Burcu Ozcelik, Bloomberg
Five ways the Iran war could unfold
Andrew England and Abigail Hauslohner, Financial Times
How the Iran War Might Impact Russia-Ukraine
Sam Skove, Foreign Policy
Qatar gas shock roils Middle East energy risk profile amid Iran war
Samuel Wendel, Al Monitor
The war against Iran is increasingly being viewed as a transformative regional conflict, comparable in long-term significance to the Gulf wars of 1991 and 2003. The confrontation has already drawn in all the Gulf states, exposed the vulnerability of energy infrastructure and civilian hubs, and raised uncertainty about Iran’s political future after the killing of Ali Khamenei and other senior officials. While the regime has sought to project continuity through emergency succession arrangements and security deployments, the country faces internal and external strain, with speculation over a leadership transition that could further empower the Revolutionary Guards. At the same time, expectations that this conflict will usher in a more stable Middle East appear overly optimistic. Even a weakened or transformed Iran would not automatically resolve the region’s underlying conflicts, many of which are rooted in local grievances, rivalries, and militant structures that extend well beyond Tehran. In that sense, the war may diminish Iran’s reach without producing the strategic reset some in Washington envisage. The conflict is also dealing a serious blow to China’s regional strategy, which had treated Iran as a key economic and geopolitical anchor linking energy flows, infrastructure investment, and a broader anti-US alignment. The weakening of Tehran, therefore, not only changes Middle Eastern calculations but also undermines Beijing’s attempt to use Iran as a strategic counterweight to American influence.
None of the emerging endgames appears free from the risk of prolonged instability. Even if military objectives are partly achieved, Iran could move toward a future of fractured authority, having a stronger role for the conventional army, and the emergence of armed local actors, or even creeping fragmentation across minority-populated border regions. Such outcomes would leave neighboring states facing not a resolved Iran question, but a more volatile one, with threats ranging from insurgency and terrorism to maritime disruption and renewed regional proxy activity. The uncertainty is compounded by the lack of clarity over Washington’s own threshold for declaring success, with scenarios ranging from negotiated settlement to regime survival in weakened form, or a longer war of attrition in which Tehran seeks simply to outlast pressure and preserve its core system. The repercussions are also extending beyond the Middle East. The war may affect the balance of the Russia-Ukraine conflict by straining US weapons stockpiles, particularly missile interceptors, and by influencing Donald Trump’s wider diplomatic calculus toward Moscow and Kyiv. Meanwhile, the shock to gas markets following the disruption of Qatari LNG exports shows how the conflict is shaping strategic risk perceptions across energy, trade, and security simultaneously. What is emerging is not a clean geopolitical resolution, but a wider reordering in which Gulf security, great-power competition, European vulnerability, and the future of Iran itself are becoming more tightly intertwined.
Geoeconomics
Market Cracks Widen as War, AI and Credit Fears Collide at Once
Denitsa Tsekova, Matthew Griffin, and Miles J. Herszenhorn, Bloomberg
Middle East war unleashes a new economic shock
Eric Albert and Béatrice Madeline, Le Monde
Qatar warns war will force Gulf to stop energy exports ‘within days’
Andrew England and Malcolm Moore, Financial Times
Iran War Oil Shock Threatens to Unleash Wave of Global Inflation
Ziad Daoud, Dina Esfandiary, Jamie Rush, Jennifer Welch and Tom Orlik, Bloomberg
Europe confronts threat of another energy crisis
Ian Johnston, Verity Ratcliffe, Sarah White and Sebastien Ash, Financial Times
The Iran War Is Upending Global Energy Markets
Carolyn Kissane, Project Syndicate
For China, Billions of Dollars Are at Risk From a Widening War
Alexandra Stevenson and Murphy Zhao, The New York Times
Global financial markets are currently confronting an increasingly complex mix of shocks that are testing the resilience of the current economic environment. The escalation of the war in the Middle East has added a new layer of uncertainty to markets already grappling with structural shifts in technology, tightening credit conditions, and persistent inflation. Oil prices briefly surged close to $120 per barrel amid fears of disruptions to the Strait of Hormuz, through which roughly a fifth of global oil trade passes, before retreating sharply as expectations emerged that the conflict might de-escalate. The rapid reversal proves the fragile sentiment prevailing across financial markets, where volatility indicators have surged, and daily market swings have become more frequent. At the same time, investors are reassessing multiple risks simultaneously like the potential for AI-driven disruption to undermine business models across several industries, rising stress in the rapidly expanding private credit market, and signs of a softening US labor market. These factors are raising doubts about the reliability of traditional market strategies and increasing concerns that the global economy may be entering a more structurally volatile phase.
The economic consequences of the conflict are already being felt most acutely through energy markets. Disruptions to gas infrastructure in Qatar and interruptions to shipping through the Strait of Hormuz have pushed European gas prices sharply higher while tightening global LNG supply. Even relatively limited interruptions have revived memories of the 2022 energy crisis, particularly in Europe, where storage levels remain unusually low following a cold winter and where competition with Asian buyers for LNG cargoes has intensified. A prolonged disruption could push oil prices toward or above $100 per barrel and raise inflation significantly across advanced economies, complicating central bank decisions on interest rates and slowing economic growth. Beyond immediate price pressures, the conflict also threatens to reshape global energy trade patterns and investment decisions. Europe faces renewed vulnerability to external energy shocks, while China, whose economic ties with the Middle East have deepened significantly in recent years through energy imports, infrastructure investment, and expanding export markets, risks disruptions to both supply chains and strategic projects across the region. More broadly, sustained instability in the Gulf could tighten global energy markets, raise costs across industrial supply chains, and reinforce inflationary pressures at a time when many economies are still adjusting to the aftermath of earlier geopolitical and economic shocks.
