Geopolitical risk dashboard

Israel has altered significantly the security environment to its advantage over the last year, but the recent conflicts have yet to be resolved through lasting settlements – keeping risks of reescalation high. The U.S. and Israeli strikes on Iran in mid-June left Iran virtually defenseless against air and missile attacks without meaningfully disrupting the supply or transport of oil. Uncertainty over Iran’s ability to produce nuclear weapons remains. Iran now faces the possibility of comprehensive UN sanctions “snapping back” from mid-October if key nuclear safeguard milestones are not met. Israel is mobilizing for a major military assault in Gaza City – which would imply a long-term Israeli security presence in the strip. The likelihood of any meaningful ceasefire remains quite low. Israel continues efforts to broadly degrade Iranian proxies. In Lebanon, a tenuous ceasefire remains in place between Israel and Hezbollah. The Lebanese government has committed to disarming Hezbollah by year-end.

The U.S. and China have extended their tactical tariff truce as part of ongoing trade negotiations. President Trump continues to express interest in a summit meeting with President Xi this year. Confronting China remains at the core of nearly every major U.S. policy area and the U.S. national security team is committed to countering China in the Indo-Pacific. Military tensions have increased in the South China Sea and could worsen in the event of an accident or miscalculation. In August, a Chinese destroyer collided with a coast guard vessel near Scarborough Shoal during coercive maneuvers against a Philippine patrol. That prompted a U.S. naval response as the U.S. joined the largest-ever joint military drills between the Philippines and Australia the same month. Meanwhile, Taiwan announced it will boost its 2026 defense budget by nearly 23% – including, for the first time, coast guard funding – in response to mounting Chinese pressure. China continues multi-dimensional efforts to prepare for a Taiwan military contingency.

AI is at the center of U.S.-China strategic competition, with its enabling physical infrastructure increasingly treated as a national security asset. The U.S. administration is seeking to turbocharge AI development and the global diffusion of U.S. technologies. In July, it issued an AI Action Plan outlining more than 90 federal policy actions to accelerate AI innovation, build AI infrastructure and expand the U.S. tech stack abroad. The administration also stated its intention to lift bans on certain advanced chip sales to China under novel revenue-sharing conditions and announced a 10% stake in a U.S. chipmaker. These steps mark a departure from the previous administration’s approach to AI export controls and underscore the debate over AI’s commercial and national security imperatives.

Mounting geopolitical competition is fueling a surge in cyber attacks that are growing in scope, scale and sophistication. Around the world, new AI technology is enabling state and non-state actors to identify vulnerable targets, craft convincing scams and generate malicious code at unprecedented speed. Since ChatGPT’s launch in late 2022, phishing attacks have increased more than forty-fold, and FBI and IMF data suggest global cybercrime costs could exceed $23 trillion annually by 2027, more than the annual GDP of China. A proliferation of new AI models has also raised concerns over their vulnerability to hacking and manipulation, prompting alarm in national security circles. State-backed hacking remains a significant risk, increasingly focused on political espionage, infecting critical infrastructure with malware and large-scale theft of intellectual property.

The threat of terrorism against U.S. interests remains at an extraordinarily high level. Al-Qaida and the Islamic State still show persistent motivation to conduct or inspire attacks abroad, even after recent U.S. counterterrorism raids targeting senior ISIS leaders in Syria. We see risks stemming from sustained instability in the Middle East, particularly following the fall of the Assad regime in Syria, and in West Africa, where jihadist groups are steadily expanding their geographic reach. Closer to the U.S., the U.S. administration has increased its focus on Latin American drug cartels it has designated as terrorist organizations. In September, the U.S. conducted a military strike on a Venezuelan vessel alleged to be carrying cartel members after previously deploying naval forces off Venezuela’s coast and escalating its rhetoric against the Nicolás Maduro regime. The U.S. has also warned its citizens at home and abroad of a heightened risk of violence stemming from the Iran-Israel conflict in June.

Russia’s invasion of Ukraine is the largest, most dangerous military conflict in Europe since World War Two. Rolling talks between Russian, Ukrainian, U.S. and European officials over the summer culminated in a meeting between U.S. President Trump and Russian President Putin in Alaska and a separate meeting days later between President Trump, President Zelensky and European leaders in Washington. These talks failed to produce a peace deal, temporary ceasefire or direct follow-on meeting between presidents Putin and Zelensky, which now seems unlikely. We think a definitive deal to end the war will be hard to reach given Russia’s maximalist goals in Ukraine, including territorial concessions, as well as Moscow’s dismissal of Western proposals for security guarantees. In the meantime, a war of attrition continues. The conflict has escalated. Russia’s summer offensive has made gains in the Donbas but has not achieved a strategic breakthrough, while Ukraine faces large-scale Russian drone and missile attacks against urban areas and energy infrastructure. Russia continues to test European resolve, including through ongoing grey zone operations and threats against greater European involvement inside Ukraine.

As global trade tensions escalate (see our Global trade protectionism risk), the impact on emerging market economies varies depending on their underlying economic structures and trade arrangements with the U.S. Several Southeast Asian countries secured near-uniform tariff rates of around 19-20%, largely preserving their relative competitiveness, though uncertainties remain around implementation, exemptions and higher rates on transshipped Chinese goods. Latin America appears better positioned, receiving lower tariff rates (except Brazil) and a separate 90-day tariff extension for Mexico in August. Amid ongoing trade uncertainty, many emerging markets are hedging with a multi-aligned approach, pursuing new trade deals, defense pacts and diplomatic initiatives with China and each other. India is a prime example, intensifying outreach to both Russia and China after a breakdown in U.S. trade talks and the imposition of additional tariffs.

North Korea has taken a series of escalatory actions that heighten risks in and beyond the Asia Pacific, including renouncing peaceful reunification with South Korea, accelerating its nuclear weapons program and deploying troops and munitions to support Russia’s war in Ukraine. U.S. President Trump has reiterated his desire to reengage North Korean leader Kim Jong Un through personal diplomacy, raising the prospect of renewed talks during his late-August summit with newly elected South Korean President Lee Jae Myung. President Lee has likewise signaled interest in easing tensions with Pyongyang as part of a broader push for balance in South Korea’s foreign relations. North Korea has so far dismissed these overtures. Compared with President Trump’s first term, Pyongyang is emboldened by its stronger relationships with Russia and China as well as its own military advances. As a result, it may be less inclined to see better relations with the U.S. as a priority.

We’ve seen a reset of the U.S.-Europe relationship since the start of the second Trump administration. European governments, focused on pursuing "strategic autonomy,” have announced ambitious defense spending and economic reform agendas. But doubts are mounting over whether Europe can deliver on and sustain these pledges. In Germany, fiscal brake reform and large-scale commitments on defense and infrastructure risk colliding with bureaucratic and industrial bottlenecks. At the EU level, the new “Readiness 2030” initiative pledges up to €800 billion in joint defense funding but faces potentially uneven participation and capacity constraints. Meanwhile, the EU-U.S. trade deal struck in July secured lower tariffs than initially feared but comes against the backdrop of a new era of global trade disputes that could impact the continent’s growth and reform agenda. These shifts have boosted European unity in the short term, but we see some risks to longer-term cohesion. Recent elections have underscored the resilience and appeal of populist movements, while France remains in a period of structural political instability that is likely to extend until and potentially through scheduled elections in 2027.