Welcome to this week’s edition of Geopolitics & the Day After. Each week, we curate and synthesize key developments from global politics, economics, and financial markets, drawing from a wide range of trusted sources. Our goal is to provide you with a clear, concise, and insightful overview of the forces transforming the world today and shaping tomorrow. Below is an overview of what we cover this week:
Geopolitics examines the how the post-WWII international order is fracturing from great-power aggression and accelerates a broader recalibration among middle powers like Japan who see American leadership as simultaneously indispensable and increasingly unreliable.
Geoeconomics covers a structurally fragile Chinese economy, growing vulnerability of US sovereign debt, speculative excess, and cascading leverage, all increasing the risk that the next crisis will not arrive in isolation but through compounding breakdowns.
Global Junctions explores how three decades of efficiency-driven globalization have produced chokepoints across European industry, US power infrastructure, and global supply chains, leaving the word structurally exposed at precisely the moment AI-driven demand is accelerating the fastest.
Global Trajectories shows institutional unpreparedness is the defining vulnerability of this moment, whether in the gap between science and governance, the dismantling of disease surveillance, a social security breakdown, or agentic AI’s conversion of financial markets into battle spaces.
Geopolitical Concerns
The Crumbling Pillars of Global Peace
Thant Myint-U, Foreign Affairs
Netanyahu’s Grand Strategy is Coming Apart
Gideon Rachman, Financial Times
Narges Bajoghli and Vali Nasr, Foreign Affairs
Japan Is Becoming the Superpower of the Middle Powers
Hal Brands, AEI
The post–World War II international system, built on the rejection of aggressive war and imperial domination, is increasingly under strain as major powers return to the use of force and diplomacy recedes. Over the past eight decades, the United Nations helped institutionalize these norms, enabling decolonization and preventing catastrophic great-power conflict; however, Russia’s invasion of Ukraine and the joint U.S.-Israeli war against Iran illustrate how these principles are eroding. In multiple active conflicts, including Ukraine, Gaza, Sudan, and Iran, diplomatic mediation has been minimal or ad hoc, while nuclear powers expand arsenals and global military spending accelerates. The war involving Iran underscores this shift: Israel’s long-standing strategy of confronting perceived existential threats through military force has not achieved decisive outcomes, with Hamas, Hezbollah, and Iran remaining operational despite sustained campaigns. Instead, the conflict has exposed Israel’s continued dependence on U.S. military support and revealed tensions within the alliance, particularly as Washington seeks to limit escalation while maintaining strategic control.
Rather than collapsing under pressure, Iran has adapted and, in some respects, strengthened its geopolitical position. Despite extensive bombing, leadership decapitation attempts, and a U.S. naval blockade, the Iranian state has remained intact, reorganizing itself under a new, more technocratic and nationalist leadership centered on the Islamic Revolutionary Guard Corps. On the battlefield, Tehran demonstrated asymmetric capabilities—deploying drone swarms, dispersing missile infrastructure, and ultimately asserting control over the Strait of Hormuz, a critical global chokepoint—while expanding the conflict across multiple fronts through allied militias. The war has also shifted regional perceptions, undermining confidence in U.S. security guarantees among Gulf states and encouraging Iran to deepen ties with China. In parallel, allies such as Japan are adjusting to this changing environment by pursuing rearmament, building regional partnerships, and strengthening, but also hedging, their dependence on the United States. Tokyo’s rapid defense buildup, expanding network of quasi-alliances, and concern over U.S. unpredictability reflect a broader recalibration among middle powers navigating a world where American leadership is seen as both essential and uncertain. Together, these developments point to a global system increasingly defined by strategic competition, regional power assertion, and diminished reliance on shared norms or multilateral institutions.
Geoeconomics
Exxon CEO Delivers Blunt Message on Oil Prices and the Economy
Hillary Remy, The Street
China is Innovative. Its Economy is a Mess. Which Will Win out?
The Economist
Are US Treasuries Becoming a Financial Chokepoint?
John Plender, Financial Times
Fortune
The Coming Equity Surge Will Test US Bull Run
Financial Times
Recent developments across energy, finance, and industrial policy reveal how geopolitical shocks are increasingly feeding directly into economic outcomes, exposing structural vulnerabilities in the global system. The closure of the Strait of Hormuz, through which roughly 20% of global oil flows, has already reduced tanker traffic to less than 10% of normal and cut Gulf output by more than 14 million barrels per day, with cumulative supply losses exceeding 1 billion barrels. Oil markets have so far been stabilized only by the rapid depletion of inventories, including strategic reserves and sanctioned crude from Iran, Venezuela, and Russia; as these buffers approach “really, really low levels,” prices are projected to surge toward $150–$160 per barrel. Such a spike would transmit rapidly through the global economy, pushing U.S. gasoline prices toward $6 per gallon, constraining central banks’ ability to cut rates, and tightening financial conditions amid an already softening labor market. This energy shock is already reverberating in China, where producer-price deflation ended only after higher imported energy costs took hold, even as the country struggles with a property-driven slowdown that recently shaved two percentage points from annual growth. Beijing’s response—massive state-backed investment in semiconductors, AI, and electric vehicles totaling hundreds of billions of yuan—acts as a strategic pivot, but one unfolding alongside $60 trillion in local government debt, falling consumer demand, and an industrial sector in which roughly 32% of firms are now loss-making, underscoring the fragility of this transition.
The global financial architecture also shows signs of emerging chokepoints analogous to Hormuz, particularly in the relationship between the United States as the world’s largest debtor and foreign creditors such as China, which holds over $930 billion in U.S. Treasuries. While mutual dependence limits the immediate weaponization of these holdings, structural shifts are underway: central banks are reducing their appetite for Treasuries amid concerns about debt sustainability and sanctions, gold has overtaken Treasuries as the leading reserve asset, and increasingly volatile private investors now absorb a greater share of U.S. borrowing. Combined with rising reliance on short-term debt and total public liabilities approaching $39 trillion, roughly 100% of the U.S. GDP. This creates rollover risks and the potential for crises, especially under geopolitical strain. Historical precedent highlights the danger: Germany’s financial attack on French silver reserves in 1873 triggered a global collapse with decades-long consequences. Even in 2008, there were discussions of coordinated debt sales to intensify financial turmoil. Parallel signs of excess appear in equity markets, where a wave of AI-driven IPOs—potentially valuing companies like SpaceX, OpenAI, and Anthropic at a combined $4 trillion—echo past bubbles, with firms trading at multiples such as 92 times revenue despite uncertain profitability. As rising equity supply tests investor demand and higher interest rates reduce liquidity, the sustainability of this boom comes into question. Together, these dynamics point to a system in which geopolitical tensions, financial leverage, and speculative capital flows are increasingly intertwined. This increases the risk that future crises will emerge not in isolation, but through cascading interactions across energy markets, sovereign debt, and global finance.
Global Junctions
Over Three Decades, China’s Promise Became a Trap for European Industry
Bastien Bonnefous, Isabelle Chaperon and Sophie Fay, Le Monde
AI Data Center Boom Risks Breakup of Biggest US Power Grid Operator
John Ainger and Jennifer A Dlouhy, Bloomberg
European Electricity Markets Have Too Much Power
The Economist
The World’s Mineral Powers Seize Their Moment
Christina Lu, Foreign Policy
Over three decades, Europe’s engagement with China followed a logic that seemed rational at every stage, joint ventures for market access, technology transfers for growth, WTO integration for convergence, yet the cumulative result is what a French government advisory body now describes as industrial “vassalage.” China has absorbed European expertise in nuclear, rail, automotive, and chemicals while building state-subsidized competitors that undercut European producers by 30 to 60% across nearly every sector. The trajectory from “Made in China” to “Invented in China” was not accidental: centralized planning, mandatory technology-sharing agreements, reverse engineering, and a deliberate indigenization strategy under Xi Jinping systematically converted foreign partnerships into domestic capability, with foreign-owned companies’ share of Chinese exports collapsing from 58% in 2005 to 22% by 2024. The same dynamic of technological dependence creating systemic vulnerability is playing out in real time within the United States, where the AI data center boom has pushed wholesale power prices on the PJM grid, which serves 67 million Americans, up 76% year-on-year, with capacity costs rising nearly 400%, to the point where federal regulators are now considering breaking up the nation’s largest grid operator entirely. They’re warning that its inability to keep pace with surging AI-driven electricity demand places American technological leadership at risk. Taken together, the European industrial story and the American grid crisis illuminate the same structural failure: decades of decisions that optimized for efficiency and short-term gain have created chokepoints, in supply chains, in energy infrastructure, and in critical technology dependencies.
Europe’s electricity markets are surfacing a paradox at the heart of the green energy transition: renewables are now so abundant during low-demand periods that wholesale prices in Germany briefly touched minus €499 per megawatt-hour on May 1st, yet the same grid infrastructure struggling to absorb excess solar and wind power is simultaneously being overwhelmed by surging AI-driven demand. The structural tension that batteries, dynamic tariffs, and expanded interconnectors are beginning to be addressed but have not yet been resolved. The physical infrastructure of the AI economy is thus pulling in two directions simultaneously: toward surplus and collapse in renewable-heavy markets, and toward scarcity and political crisis in data-center-heavy ones. Beneath both pressures lies a deeper contest over the material inputs that make the entire technological edifice possible, critical minerals, where resource-rich nations from the DRC to Brazil to Zimbabwe are deploying a new assertiveness, banning raw mineral exports, demanding processing rights, and playing the United States, China, and Europe against each other to extract maximum value from a geopolitical moment they recognize as historically rare. China retains a commanding chokehold over global mineral processing, having invested $98 billion across 47 countries over two decades, while Washington’s transactional approach, conditioning health aid on mineral access in Zambia, pressing Brazil for exclusivity it has refused, is generating diplomatic friction that undercuts the very supply chain diversification it seeks.
Global Trajectories
In a First, Scientists Precisely Edit Human Embryo Genes
Carl Zimmer, New York Times
This is Why You Don’t Slash Humanitarian Aid
Nicholas Kristof, New York Times
America’s Social Security Trust Fund is Disappearing
The Economist
Agentic AI Opens the Door to Weaponizing Financial Systems
John James and Alia Brahimi, Atlantic Council
Two stories from the frontier of biological risk illustrate the same governing failure: the gap between what science can now do and what institutions are prepared to manage. At Columbia University, researchers have achieved base editing of human embryos with unprecedented precision, successfully altering genes linked to heart disease and fetal hemoglobin production without the chromosomal destruction that made earlier CRISPR attempts “catastrophic.” This opens a path toward the elimination of inherited diseases but also, as critics note, providing a “how-to manual for baby improvers” who seek to engineer traits rather than cure illness, in a regulatory and ethical landscape that has no consensus framework for what comes next. Meanwhile, the Ebola outbreak now spreading in the Democratic Republic of Congo has become the third worst on record, not because the science of detection and containment has failed, but because the institutional infrastructure built to deploy it has been deliberately dismantled. The USAID cuts that eliminated 70% of humanitarian funding in Congo left the outbreak undetected for weeks. U.S. withdrawal from the WHO severed information channels that once provided nine days of early warning and vacant pandemic preparedness positions meant that Biden administration planning documents handed to incoming officials were reportedly ignored entirely. The connecting thread is not technology but governance: in embryo editing, scientific capability has raced ahead of the ethical and regulatory architecture needed to guide it, while in disease surveillance, the architecture that existed has been actively dismantled before the crisis that would reveal its value had arrived. In both cases, the cost of institutional unpreparedness will be measured not in the moment of failure but in the years of consequence that follow.
Two structural vulnerabilities, one fiscal and one systemic, are maturing on parallel tracks toward crises that institutions are either unwilling or unprepared to address before they arrive. America’s Social Security trust fund, which peaked at $2.8 trillion in 2017, has since shed $400 billion and is projected to run dry by late 2032 or early 2033, at which point payments will automatically drop by roughly 23%, yet the political conditions for a bipartisan fix, last achieved in 1983 when the fund was months from depletion, are arguably more remote today than at any point in modern American legislative history, with polarization at a recorded high, a president who has ruled out reforms, and 71% of the public demanding increases rather than adjustments. The required fixes are technically modest and well understood, but as one analyst puts it, penciling out a solution is “completely different to the political calculus,” and Washington’s institutional default, borrowing rather than reforming, is precisely what transforms a manageable problem into a generational one. Compounding this fiscal fragility is a less visible but faster moving threat: agentic AI is converting the global financial system into what analysts now describe as a contested battlespace, where state and non-state adversaries, from Chinese firms harvesting financial datasets under research pretexts to Russian ransomware networks extracting hundreds of millions in cryptocurrency to North Korea’s Lazarus Group stealing over $2 billion in digital assets in 2025 alone, are deploying autonomous systems capable of data poisoning, synthetic identity fraud, coordinated short selling, and engineered liquidity crises at machine speed and with diminishing attribution. The convergence of these two trajectories, a fiscal system whose political repair mechanism is broken and a financial system whose defensive architecture was built for a slower, more linear threat environment, points toward the same structural conclusion: the institutions designed to absorb and manage systemic risk are falling behind the pace of the risks they were built to contain.
