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 changing dynamics of NATO, Ukraine’s increased role in geopolitics, Russia and China’s call for a multipolar world, and new strategies of the EU amidst a changing world order.
Geoeconomics highlights the widespread strain from the Strait of Hormuz closure and the subsequent bond routs, inflationary pressures, emergency measures, and recession fears despite the US stock market’s record high valuations.
Global Junctions outlines the historic waves of capital and corporate consolidation being driven by AI, as well as the weaponization of computing as a geopolitical chokepoint.
Global Trajectories reveals how stalled conflicts, falling birth rates, and collapsing humanitarian systems are the world’s defining transitions and the punishments the world will experience if action is not taken.
Geopolitical Concerns
Europe’s Plan B to Replace NATO
The Economist
How the War in Iran Helped Ukraine Go from Problem to Solution
Yaroslav Trofimov, The Wall Street Journal
Xi and Putin Back Shared ‘Multipolar’ Vision in Beijing After Trump Visit
CK Tan, Nikkei Asia
Matthias Matthijs and Natalie Tocci, Foreign Affairs
Trump’s decision to scrap the deployment of a 4,000-strong armored brigade to Poland, the second military cut in a single month, has forced European NATO members to confront what was once unthinkable. Europe must begin planning to fight not just without American support, but potentially against American obstruction of the alliance’s command structure. Senior defense officials across several countries are quietly developing a “Plan B,” with the Joint Expeditionary Force, a British-led coalition of ten Nordic and Baltic states, emerging as the most viable alternative command structure, capable of operating outside NATO’s consensus-based decision-making and without reliance on American communications infrastructure. Yet Europe’s strategic anxiety is being met, in part, by the unexpected asset that is Ukraine. The country Trump once dismissed as a liability, war-ravaged with no cards to play, has been recast by the Iran conflict into one of the most valuable defense partners in the world. Ukraine’s four years of drone warfare expertise, battlefield management systems, and mass-production capabilities are now being actively sought by Gulf monarchies, European militaries, and even U.S. Central Command. Taken together, the two stories reveal a profound restructuring of Western security: Europe is being pushed toward strategic autonomy faster than it planned, and Ukraine, far from being a problem to be settled, has become a cornerstone of the emerging post-American defense architecture it is helping to build.
Last week’s twin summits in Beijing — first Trump, then Putin — captured the central tension now defining global order. Xi hosted both leaders with near-identical ceremony, signaling that China intends to manage its relationships with Washington and Moscow in parallel rather than choosing between them. The Xi-Putin joint declaration’s call for a “multipolar world” and rejection of “hegemonism and bloc confrontation” amounted to a coordinated rebuke of American unilateralism, even as Beijing quietly hedged its energy dependence on Russia by declining to finalize the Power of Siberia 2 pipeline on Moscow’s terms. Meanwhile, the Europe that both summits implicitly sought to marginalize is proving more resilient than expected. Trump’s overreach, from threatening Greenland’s sovereignty to slashing military support for Ukraine by 98% to plunging the continent into an energy crisis, has produced the opposite of the strategic fragmentation he may have intended. European coalitions are forming around Ukraine, defense financing, and Strait of Hormuz security; the EU has struck landmark trade deals with India, Australia, and Mercosur at unprecedented speed; far-right parties backed by Trump and Vance have suffered a string of electoral defeats from Berlin to Budapest; and a clean energy transition once dismissed as ideological indulgence is now being reframed as a core security imperative. The deeper irony, as one analysis puts it, is that Trump may have achieved what decades of European declarations could not, making the cost of dependence on the United States too visible to ignore.
Geoeconomics
The Global Bond Rout is Accelerating. Here’s What to Know.
Sam Goldfarb, The Wall Street Journal
$50 Trillion Safe-Haven Debt Market Upended by Iran War Inflation
Enda Curran, Mark Schroers, Ye Xie, and Jorgelina Do Rosario, Bloomberg
The Economist
Tipping Point Looms for Global Energy Crisis
Malcolm Moore, Sam Fleming, and Jonathan Vincent, Financial Times
The Stock Market Has Never Been So Good When People Have Felt So Bad
Justin Lahart, The Wall Street Journal
The Iran war’s closure of the Strait of Hormuz has triggered a global bond rout of historic proportions, with 10-year U.S. Treasury yields hitting their highest level since early 2025 and 30-year yields reaching an 18-year high. Investors, scarred by the “transitory” miscalculation of 2022, are now pricing in Federal Reserve rate hikes rather than cuts, betting that elevated energy costs will prove persistent rather than temporary. The selloff is not confined to the United States: Japanese yields are surging on fears of expansionary fiscal spending, UK gilt markets are rattled by political instability, and Australia’s central bank has already delivered three rate hikes this year, warning of “another inflationary shock coming not that long after the last one.” What makes this moment structurally different from previous energy shocks is the compounding nature of the pressures: pandemic-era debt overhangs, fragmented supply chains from great-power rivalry, AI-driven chip demand adding its own inflationary pulse, the growing prospect of an El Niño threatening global crop supplies. Governments across the G7 simultaneously borrowing more to cushion their citizens is subsequently enhancing the risk of “rate hikes everywhere.” Beneath this financial turbulence lies a quieter but equally consequential disruption: China is defying the “flying geese” model of development that once guided expectations of manufacturing migration across Asia, retaining dominance across low-, medium-, and high-tech exports simultaneously by deploying automation and internal labor mobility to remain competitive at every tier. This leaves poorer nations squeezed not only by inflation and energy costs but by a manufacturing rival that shows no signs of vacating the lower rungs of global production.
The world is approaching what traders and economists describe as a genuine tipping point in the energy crisis, with global oil consumption running roughly 6 to 9 million barrels per day above production since the Strait of Hormuz closure, strategic reserves falling by nearly 380 million barrels, and JPMorgan warning that OECD inventories could approach “operational stress levels” by early June. Nearly 80 countries have now introduced emergency measures, and analysts are seriously modeling a scenario where Brent crude surges to $180 a barrel, triggering recessions across Europe and Asia; the EU’s transport commissioner has warned bluntly that if Hormuz is not reopened within weeks, “a world recession could be on the table.” Yet against this backdrop of historically low consumer sentiment, the U.S. stock market has reached record valuations, with the S&P 500’s cyclically adjusted price-to-earnings ratio above 40 for only the second time in 145 years of data, the first being the peak of the dot-com bubble. The paradox is not accidental: AI investment is simultaneously driving corporate profit expectations skyward and stoking worker anxiety about displacement, meaning the stock market and the American consumer are, as one economist puts it, “reflecting on the same thing,” a future of widening margins and narrowing opportunity, and simply drawing opposite conclusions about what it means for them.
Global Junctions
The New Arms Race in Computing Power
Charles Clover, Financial Times
SpaceX’s Ambitions Are Intergalactic. Its Business is Selling You Internet
Ben Cohen, Wall Street Journal
How the AI Revolution has Turbocharged M&A
James Fontanella-Khan, Arash Massoudi, Oliver Barnes, Sujeet Indap, and Ryan McMorrow, Financial Times
The AI Boom is a Dilemma for Retail Investors
Parmy Olson, Bloomberg
The emerging shape of the global economy is increasingly defined by a paradox: unprecedented technological ambition paired with fragile economic foundations and rising systemic risk. At one level, the AI boom is unleashing a historic wave of capital expenditure and corporate transformation, with hundreds of billions flowing into data centers, chips, and infrastructure while triggering a surge in mergers, acquisitions, and strategic consolidation across sectors from utilities to semiconductors. Companies are racing not just for innovation, but for scale—treating energy, compute, and talent as scarce strategic assets, with governments reframing AI as a geopolitical contest. Yet beneath this expansion lies a growing instability. Retail investors are being pulled into a market where valuations depend on aggressive assumptions about future demand that remains unproven, echoing the dynamics of the dot-com bubble, while circular financing and speculative hype expose the system to cascading shocks. Even the most ambitious players reveal the same underlying truth: SpaceX’s vision of colonizing Mars ultimately rests on selling terrestrial internet, a reminder that even the most futuristic enterprises depend on mundane, monetizable infrastructure.
The AI revolution is reshaping not just markets but the distribution of power between firms, investors, and nations. Control over the “compute stack” is emerging as a new foundation of sovereignty, with the US and China dominating global capacity while others scramble to secure niches through alternative technologies such as neuromorphic and quantum computing. This has turned computing itself into a geopolitical chokepoint, where access can be weaponized, and dependence becomes a strategic vulnerability. The result is a fragmented landscape in which countries pursue partial autonomy through industrial policy and targeted investment, even as the system becomes more interdependent. Across both corporate and national levels, the same dynamic is playing out: the race to build the infrastructure of the AI era is concentrating power, capital, and capability in fewer hands, while provoking political backlash over energy use, local disruption, and economic exclusion. As with past technological revolutions, the long-term gains may be transformative—but in the near term, the combination of speculative excess, infrastructure strain, and geopolitical competition suggests a transition defined less by smooth progress than by volatility, contested control, and the risk that the underlying economics fail to justify the scale of the ambition.
Global Trajectories
Janan Ganesh, Financial Times
Africa is the Key to Sustained Global Growth
Hippolyte Fofack, Project Syndicate
With his Encyclical, Leo XIV…Calls on US to Build That Other World
Alberto Melloni, Le Monde
Will the AI Economy Have a Middle Class?
Navin Girishankar, CSIS
The world is drifting into a structural stalemate—where power, knowledge, and opportunity are more evenly distributed than in past eras, but in ways that paralyze decisive outcomes and amplify instability. From battlefields in Ukraine and the Gulf to U.S. domestic politics and the U.S.–China rivalry, conflicts increasingly persist without resolution, sustained by the rapid diffusion of information and tactics that erode any lasting advantage. This same dynamic is beginning to shape the economy: AI is not collapsing the labor market outright, but it is already hollowing out the middle, concentrating gains among elite engineers and infrastructure buildouts while exposing tens of millions of mid-level knowledge workers to the risk of automation. The danger is not immediate collapse but prolonged equilibrium under stress, in which neither political systems nor labor markets adjust fast enough to restore balance, and where the absence of clear winners removes the pressure to compromise, reform, or stabilize.
Concurrently, a parallel reordering of global growth and social norms is underway, centered on both demographic expansion and contraction. Africa’s youth-driven population boom represents one of the few remaining engines of global demand and industrialization, with the potential to offset aging and stagnation elsewhere—but only if investment, infrastructure, and policy convert that demographic weight into productive capacity rather than unrest. In contrast, advanced and middle-income societies are grappling with falling fertility, social fragmentation, and the disruptive cultural effects of digital life, even as humanitarian systems in fragile states strain under conflict and funding shortfalls. Into this fractured landscape steps a moral and political response: calls from Pope Leo XIV for more active governance of technological and economic change, emphasizing public oversight, shared ownership, and the protection of human dignity against concentrated power. The common lesson is that the defining transitions of this century—AI, demographics, and geopolitics—are unfolding not as clean breaks, but as grinding, contested adjustments, where the failure to build new institutions and safety nets early risks locking in instability long before the data clearly signals crisis.
