Geopolitical risk dashboard

On February 28 the U.S. and Israel launched a large-scale combat and intelligence operation targeting Iran’s leadership and military and security apparatus, resulting in the death of Iran’s Supreme Leader and ongoing regional war. The U.S.’ articulated goals for the operation, which it dubs “Epic Fury,” include degrading Iran’s ballistic missile infrastructure, internal security apparatus and Navy and destroying its nuclear program. Israel is pursuing a more maximalist regime change strategy. Iran has retaliated with strikes on Israel, U.S. military and civilian assets in the region and targets across the Gulf states, including regional energy infrastructure, as it seeks to exact cost and preserve its regime. Shipping through the Strait of Hormuz, a critical chokepoint for global energy, has ground to a near-halt amid Iranian threats to close it, with outsized consequences for Europe and Asia. Hezbollah has joined the fight by launching rockets into Israel, triggering Israeli retaliatory airstrikes across Lebanon. Key uncertainties include the duration of the conflict, which will be constrained by offensive and defensive stockpile limitations on both sides, and what leadership takes shape in Iran. Separately, a second phase of the U.S.-brokered peace plan to end the war between Israel and Hamas is now underway in Gaza. We think a lasting settlement will be difficult to achieve given the uneven implementation of phase one commitments and ongoing Israeli security operations in the territory.

Artificial Intelligence (AI) is increasingly a national security issue and a political issue. It is at the center of U.S.-China strategic competition, with both countries believing it will deliver insurmountable economic and military advantage to the country leading the AI race. Data centers and other enabling infrastructure are now squarely in the frame of national security given their increased scale, visibility and economic importance. Governments and technology companies will need to more seriously consider physical risks alongside cyber risks as a result. As global fragmentation accelerates, even among traditional allies, tech sovereignty concerns will likely intensify. This will prompt questions about over-relying on any single country’s technology stack and drive more demand for increased data integrity and control. At the same time, tech companies and policymakers are grappling with societal and safety concerns around AI – from labor disruption to energy prices, privacy concerns and abuse by authoritarian systems.

Mounting geopolitical competition is fueling a surge in cyber attacks that are growing in scope, scale and sophistication. Advances in generative and agentic AI now empower even unsophisticated threat actors, including criminals, to identify vulnerable targets, craft convincing scams and generate malicious code – at unprecedented speed and with increasing autonomy. Beyond phishing, AI is being used to generate adaptive malware, exploit identity credentials and probe AI systems themselves for weaknesses. Recent disclosures by leading AI developers that state‑linked actors have sought to replicate frontier models through illicit training on Western platforms underscore how AI systems themselves are becoming targets in geopolitical competition. State-backed hacking remains a significant and expanding risk, focused on political espionage, infecting critical infrastructure with malware and large-scale theft of intellectual property. Iran remains a capable state actor in this space. We are watching for accelerated Iranian cyber operations targeting the West in light of the U.S. and Israeli operation and expanded regional war.

The threat of terrorism against U.S. interests remains high. Extremist groups such as ISIS and Al-Qaeda continue to demonstrate intent to attack U.S. interests, exploiting instability in the Sahel, East Africa, and Middle East. In Syria, thousands of ISIS-linked detainees and family members escaped from the Al-Hawl camp in January, while new UN estimates suggest Al-Qaeda and its affiliates have 50 times more recruits than they had around 9/11. Iran retains significant cyber and global terrorism capabilities that could be deployed in response to the death of the its Supreme Leader and an ongoing existential threat to the regime’s survival. Western intelligence agencies are on high alert.

We introduce a Western Hemisphere tensions risk to reflect a decisive reorientation of U.S. security priorities towards the region following the January U.S. operation to capture Venezuela’s President Nicolás Maduro and seize control of Venezuela's oil market, along with the largest military buildup in the Caribbean since the Cuban Missile Crisis in 1962. Several reinforcing dynamics drive this shift, including a domestic policy confluence of immigration and counternarcotics; resource nationalism; and a strategic effort to reassert U.S. dominance in the hemisphere, consistent with a revived interpretation of the Monroe Doctrine. We think the U.S. will employ coercive economic, diplomatic, law enforcement and military levers to compel compliance from countries in the hemisphere and put pressure on adversary regimes. Cuba is currently in focus as a halt of Venezuelan oil imports and U.S. pressure against other oil providers have pushed Cuba’s economy – and regime – to its weakest point since the early 1990s.

On February 20, the U.S. Supreme Court invalidated tariffs imposed under a 1977 emergency powers statute that constituted the Trump administration’s universal baseline and country-specific “reciprocal” tariffs, as well as fentanyl-linked tariffs on China, Canada and Mexico. These measures were central to President Trump’s tariff agenda and underpinned bilateral trade agreements that may now face legal uncertainty or pressure to reopen negotiations. Within days of the ruling, the Administration implemented an initial 10% across-the-board tariff level under separate Section 122 authority – reinforcing our view that it will move quickly to reconstitute much of its tariff program through alternative authorities. We expect new Section 301 investigations to follow, with rolling negotiations, agreements and disputes representing the new normal in U.S. trade policy. Global trade flows are rewiring, not reversing. Even with growing protectionism, global trade exceeded a record $35 trillion last year. Countries hedging away from the U.S. are increasingly diversifying trade ties, including through the EU-Mercosur and the EU-India agreements announced in January. China's record $1.2 trillion trade surplus for 2025 poses a significant overcapacity challenge for consumption economies in Europe and Southeast Asia.

The Trump administration remains determined to maintain a commercially focused détente with China following the October meeting between President Trump and President Xi Jinping in South Korea and a follow-up call in early February. The trade truce buys time for each side to focus on domestic concerns and manage strategic vulnerabilities in areas like critical minerals and advanced semiconductor supply chains. For now, the détente is holding – but it is narrow, fragile and subject to disruption across a range of issues, particularly defense and security. We expect this period of relative stability to persist this year, with a series of potential leader-level engagements beginning with Trump’s scheduled visit to Beijing in late March. At the same time, structural competition with China remains at the core of nearly every major U.S. policy, across trade, tech, cyber, defense and energy. In the military sphere, the U.S. remains committed to countering China in the Indo-Pacific. Taiwan remains a potential flashpoint: In December, the U.S. announced a record $11 billion arms package for Taiwan, and China conducted some of the most expansive military maneuvers near the island to date amid rising regional frictions.

Russia’s invasion of Ukraine remains the largest and most dangerous military conflict in Europe since World War Two. Recent diplomacy has led to the first talks between all three of Russia, Ukraine and the U.S. since Russia’s full-scale invasion of Ukraine in 2022. Ukrainian officials have said that Russia would accept U.S.-backed security guarantees for Ukraine, although negotiations remain stalled and ongoing Russian escalations will still challenge a durable settlement, in our view. In the meantime, Ukraine faces large-scale Russian drone and missile attacks on urban areas and energy infrastructure, leaving citizens without power and heat over winter. Ukraine has responded with sustained strikes on Russian energy export facilities and military targets. Moscow keeps testing European resolve through ongoing grey-zone operations, to which governments have begun to implement a stronger response.

U.S.-Europe relations have undergone a complete reset since the start of the second Trump administration and are now under historic strain. A combination of economic and security flashpoints have deepened the fracture – including recent U.S. threats to seize Greenland by force. At the World Economic Forum, Canada’s Prime Minister Mark Carney called for middle powers to unite around shared interests and to resist coercion from great powers, echoed by other European leaders. This is likely to accelerate ongoing trends towards diversification away from the U.S., seen in a slate of new free trade agreements, sweeping defense spending, fiscal reforms and a procession of Western leaders to Beijing. Europe's push for strategic autonomy is directionally feasible, but we think fully substituting its economic and security relationship with the U.S. is unlikely. Decision-making complexity at an EU level will further constrain those efforts. Hedging towards China as part of this strategy risks exposing domestic industries to Chinese industrial overcapacity and inviting a U.S. response. We expect these geopolitical changes to accelerate Europe’s reform agenda and unlock opportunities for investors, outlined in our November paper, "What's needed for Europe's Investment Renaissance?".

North Korea has taken a series of escalatory actions that heighten risks in and beyond the Indo-Pacific: renouncing peaceful reunification with South Korea, accelerating its nuclear weapons program and deploying troops and munitions to support Russia’s war in Ukraine. Pyongyang has ramped up its missile program since the start of the year, launching multiple short-range ballistic missiles in January and testing advanced hypersonic weapons. Trump and South Korean President Lee Jae Myung share a desire to ease tensions with Pyongyang and engage North Korea Leader Kim Jong-un through personal diplomacy. Yet compared with Trump’s first term, Pyongyang appears emboldened by its stronger ties with Russia and China, as well as its own military advances. North Korea may therefore be less inclined to pursue better relations with the U.S. At a regional level, a January summit between the leaders of South Korea and Japan led to commitments for deeper defense cooperation, evidenced by the resumption of joint naval search-and-rescue training after nine years.