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 failed US/Russian assumptions that conventional military advantages would translate to their enemy’s capitulation alongside the fragile state of the global system as power politics take increasing precedence over the once rules-based order.
Geoeconomics covers the strain that mega IPOs and surging valuations have on the world economy and potential, financial alternatives being sought out in return such as Singapore’s OTC gold clearing system.
Global Junctions explores the rapidly emerging role of quantum technology and its implications for financial systems and cybersecurity, the increasing autonomy of AI systems, and the subsequent restructuring of financial architecture.
Global Trajectories sheds light on the grave danger facing the world’s population as climate disasters such as El Niño not only become more common, but increasingly costly for governments and people alike, particularly at a time where wealth inequality is so vast.
Geopolitical Concerns
Deadlocked Wars: How Major Powers Misread the Regions They Attacked
Neil MacFarquhar, New York Times
A Fragile Peace Follows a War Without Victors
Gideon Rachman, Financial Times
The Fault Lines in China’s Power
Ely Ratner and Nick Danby, Foreign Affairs
Asia Shaken as US Abandons Role as Guardian of Rules-Based Order
Hiroyuki Akita, Nikkei Asia
The wars in Ukraine and Iran have arrived at the same structural destination. Two major powers, Russia, and the United States, launched conflicts premised on rapid capitulation by ostensibly weaker adversaries, and both have instead found themselves trapped in costly stalemates that have eroded their credibility without achieving their stated objectives. Putin expected Kyiv to fall in days and the Ukrainian people to welcome Russian forces; Trump was warned that Iran could close the Strait of Hormuz and ignored it, underestimating Tehran’s capacity to retaliate, sustain domestic cohesion, and reorganize under pressure. In both cases, the stronger power projected its own views onto the adversary and did not plan for what could happen next. Conventional advantages such as air power, however devastating, proved insufficient to force political outcomes. The Geneva framework now scheduled for signing, a 60-day ceasefire extension allowing the Strait of Hormuz to reopen gradually while nuclear and sanctions issues are deferred to future negotiations, reflects this stalemate rather than resolving it. Hardliners in Washington wanted regime change and got neither that nor denuclearization, Israeli officials are openly furious at being constrained in Lebanon, Iranian ultranationalists are protesting in the streets, and Gulf states are quietly reassessing whether Washington is too capricious to rely on as a security guarantor. With Ukraine similarly locked in a negotiating impasse built on mutual distrust and maximalist demands, the parallel outcomes point toward the same conclusion: deadlock in both theaters is not a temporary pause on the road to resolution but a signal of a more decentralized international order.
China’s decision to weaponize rare earth export controls during the 2025 trade war, a move that forced the Trump administration to fold within weeks, exposed a gap in Washington’s China strategy: decades of focus on military deterrence, domestic investment, and allied coalition building, while largely leaving Beijing’s most exploitable vulnerabilities untouched. China controls 90% of global rare earth processing, nearly 70% of its international trade flows through dollar-denominated institutions, its export-dependent economy posted a record $1.2 trillion trade surplus in 2025 while domestic consumption lingers at just 40% of GDP. Its industrial base depends on foreign suppliers for critical inputs from Australian iron ore to aerospace components from Western supply. The strategic logic of pressing on these pain points is not regime change but calibrated leverage: constraining China’s access to advanced semiconductors and building coalitions to counter its exports. Yet the broader international context in which this competition is playing out is itself deteriorating. At the Shangri-La Dialogue in Singapore, U.S. Defense Secretary Pete Hegseth’s explicit dismissal of the rules-based international order as “empty globalist rhetoric” alarmed Southeast Asian partners who depend on international law to constrain great-power behavior. Malaysian officials noted that powerful countries now violate agreements without the international response that smaller states would face. The convergence of these two dynamics, Washington’s unrealized competitive leverage over Beijing and its simultaneous erosion of the normative architecture is producing exactly the fragmented Asian strategic landscape that regional partners most fear.
Geoeconomics
Is the US Stock Market Too Big?
Jim O’Neill, Project Syndicate
Singapore to Launch Gold Clearing System in Bid to become Precious Metals Hub
Owen Walker, Financial Times
Mega I.P.O. Frenzy Could Be a Harbinger of a Stock Bubble
Jeff Sommer, New York Times
The Great Bond and Equity Conundrum
Gillian Tett, Financial Times
The U.S. stock market now accounts for roughly half of total global equity valuations while the U.S. economy represents only about 25% of global GDP, a discrepancy that either implies an imminent AI-driven acceleration in underlying economic performance or suggests a correction of historic proportions. The Japanese market’s experience after its own 45% peak in 1990 offers an uncomfortable historical precedent for what valuation gravity can eventually impose. The divergence is starker when set against the actual trajectory of global economic weight: the center of global GDP has been drifting steadily eastward since the 1980s and is projected to reach China’s border by 2040, with China and India vastly outperforming original growth projections while every major developed economy, including the United States, fell short of what analysts expected 25 years ago. Meanwhile, the physical infrastructure of the gold market is quietly reorienting to match that eastward shift, with Singapore launching an over-the-counter gold clearing system backed by JPMorgan, Deutsche Bank, and several Asian institutions, and the London Bullion Market Association itself considering moving its morning auction earlier to accommodate Asian trading hours. The overvaluation of U.S. equities relative to GDP, the eastward migration of global economic weight, and the reorientation of gold infrastructure toward Asian hubs are three expressions of the same underlying shift: the financial architecture of the twentieth century, built around American economic dominance, is being quietly but consequentially renegotiated.
A peculiar and potentially unsustainable paradox now haunts global markets. Equity yields on the S&P 500 have fallen roughly 0.85 percentage points below 10-year Treasury yields, inverting a relationship that held for three decades and suggesting that either bonds are severely mispriced, or equities are in a bubble. The information technology sector trades at a price-to-earnings ratio above 39, SpaceX debuted at over 90 times revenue, and Shiller’s CAPE ratio has reached levels not seen since the dot-com peak, yet the market has largely shrugged off rising bond yields, 4.2% inflation, and a projected $2 trillion federal deficit. The mega-IPO wave amplifies the risk considerably. The Treasury needs to sell $10 trillion in bonds over the next year at precisely the moment that trillions in new equity supply from SpaceX, Anthropic, and OpenAI are competing for the same investor capital, creating what one analyst describes as the return of competition for capital after a decade of excess liquidity. The unresolved question at the center of every valuation model is whether AI will deliver the productivity miracle that justifies current prices before the weight of debt, inflation, and capital competition forces a reckoning that the dot-com era suggests could be both severe and prolonged.
Global Junctions
The Quantum Computing Revolution is Closer than You Think
Michael Peel, Financial Times
The $4 Trillion Question: Can OpenAI, Anthropic, and SpaceX Stick the IPO Landing?
Martin Baccardax, Barron’s
How Artificial Intelligence Got Better at Building Itself
The Economist
China is Building New Financial Architecture for Clean Energy Tech
Ebipere K. Clark, Carnegie Endowment for International Peace
Quantum computing is moving from laboratory curiosity to commercial reality faster than its critics anticipated, with Microsoft, Google, and IBM all targeting useful machines by 2030. Quantinuum’s Nasdaq IPO valued the sector above $15 billion, and the U.S. government announced $2 billion in equity stakes across nine quantum firms. The technology’s near-term promise lies not in replacing conventional computers but in solving specific categories of problems that classical machines handle poorly, from drug interaction modeling and fraud detection to portfolio optimization and materials science. The more urgent concern is Q-Day, the point at which sufficiently powerful quantum machines can break the cryptographic foundations of modern digital security, a threat serious enough that institutions are already deploying post-quantum encryption standards while adversaries pursue a “harvest now, decrypt later” strategy against sensitive data. Against this backdrop of foundational technological transition, markets are simultaneously being asked to absorb three AI mega-IPOs valued at nearly $4 trillion combined, for companies that have yet to turn a profit and whose revenue projections rest on infrastructure spending that has not yet translated into sustainable earnings. Whether quantum computing vindicates or undermines the AI investment thesis will ultimately determine whether the current wave of capital concentration in deep technology produces the productivity miracle markets are pricing in, or the reckoning that valuation history suggests is overdue.
The pace at which AI is learning to build itself is accelerating faster than most outside the industry have recognized. More than four-fifths of the code Anthropic published in May was written by Claude, up from low single digits before Claude Code launched in early 2025. The concept at stake is recursive self-improvement, a closed loop in which each model generation builds the next with diminishing human involvement, and Anthropic co-founder Jack Clark puts the probability of a fully autonomous AI successor at 60% by end of 2028. The physical and commercial constraints on this trajectory are real but not permanent: data center capacity, training data availability, and the pace of chip manufacturing currently impose speed limits, though the same AI-driven efficiency gains that are compressing those timelines are also eating into those limits from the inside. Meanwhile, a parallel contest is underway for who controls the financial architecture of the clean energy transition in the Global South. China’s cost of capital advantage, currently more than 260 basis points below U.S. Treasury yields, is being systematically deployed through policy bank lending, RMB swap corridors, and a programmable digital yuan infrastructure that can embed conditions directly into payment flows, ensuring funds purchase eligible Chinese electrotech equipment and route through Chinese financial corridors automatically. Developing country finance ministers facing fuel subsidy crises from the Hormuz shock are being offered a complete system: cheap finance, manufacturing dominance across 80% or more of the solar supply chain, and digital payment rails that make the terms self-enforcing, a package the Western offer of fragmented concessional finance and complex conditionality has not matched and, at current pace, is unlikely to match before the decisions are made.
Global Trajectories
El Niño Emerges in Pacific, Raising Heat and Crop Risks
Brian K. Sullivan, Bloomberg
Jonathan Mingle, The New York Review
Wages are Falling. Wealth is Surging. No Wonder Americans are Unhappy.
Ben Casselman, New York Times
Planning for the Rising Fiscal Costs of Climate Disasters
Bruegel
El Niño has formally emerged in the equatorial Pacific for the first time since 2023 and is forecast to intensify into a potential super event by December, adding a compounding climate shock to an agricultural system already strained by the Hormuz-driven fertilizer shortage. Strong El Niño events have historically reduced yields across palm oil, coffee, cocoa, wheat, and rice simultaneously, and the 1997 event caused $100 billion in damages and at least 30,000 deaths at a fraction of today’s food system exposure. Running beneath this near-term crisis is a slower and more structurally alarming dynamic: atmospheric methane concentrations are now 2.6 times their preindustrial level and rising faster over the past five years than at any point since records began, driven increasingly by tropical wetlands responding to warming with higher microbial output, a feedback loop current climate models do not fully account for. Methane is the climate system’s most actionable lever, capable of restoring roughly half a degree of warming if emissions were cut to zero, yet the Global Methane Pledge is being systematically abandoned, the U.S. has repealed its methane fee and revoked its endangerment finding, and nearly 90% of methane leak alerts sent to oil and gas companies by the UN’s monitoring network last year went unanswered. The gap between what is physically possible and what is politically being done has rarely been wider, and El Niño’s arrival is a reminder that the consequences of that gap do not wait for the policy calendar.
The same week that SpaceX’s IPO made Elon Musk the world’s first trillionaire, the Bureau of Labor Statistics reported that the energy price surge had wiped out a year and a half of real wage gains for the average American worker. The juxtaposition captures something structural rather than incidental: the share of national income going to workers hit a record low in the first quarter of 2026, the top 0.00001% of Americans now hold wealth equivalent to 12% of annual GDP compared to 3% at the height of the Gilded Age, and AI-related capital concentration is accelerating that divergence rather than interrupting it. For most workers the AI boom presents a genuine Catch-22: if the technology succeeds, it threatens their jobs; if it fails to justify its valuations, their retirement savings evaporate with the bubble. Meanwhile European governments are confronting a parallel fiscal reckoning driven not by markets but by climate. Between 2021 and 2024 direct climate disaster damage across the EU totaled €208 billion, and a one-in-25-year drought alone would put nearly 15% of European economic output at risk given that over a third of corporate loans go to sectors exposed to water scarcity. The structural problem is that insurance coverage averages just 20% across EU countries while governments rely almost entirely on ad-hoc budget allocations after disasters strike, creating what researchers describe as a potential “climate sovereign doom loop” in which disaster losses reduce growth, shrink fiscal revenues, raise borrowing costs, and make the next round of adaptation investment even harder to finance. Across both the American inequality crisis and the European climate fiscal crisis, the common thread is the same: the institutions and policy frameworks inherited from a more stable era are being asked to absorb shocks they were not designed to handle, and the gap between what those shocks demand and what current systems can deliver is widening faster than reform is moving.
