Geopolitical Risk

The national average price of diesel hit $5.85 a gallon this week, an all-time high, and two separate wars, thousands of miles apart, are why.

Niger's military government seized power in 2023 promising to reclaim the country from foreign influence. Three years later, it only survived a mutiny because a different foreign power's soldiers fought to keep it in charge.

Sanctions did to Venezuela's oil output what an OPEC quota never could. Now that oil might end up refilling America's own strategic reserve.

Ukraine paused its own strikes on Moscow and St. Petersburg this week so a US spy chief could fly in for a meeting that hadn't happened in two years.

Romania sits on the western edge of the Black Sea, the body of water separating it from Russia and Ukraine to the east. On August 20, two Romanian fighter jets destroyed an explosive-carrying drone about 80 nautical miles off Constanța, Romania's main Black Sea port, near an offshore gas platform called Neptun Deep. It was the fourth drone incident near Romania in three weeks, and the second at this exact platform.

Any company that signs a long-term contract with a foreign government typically insists on one specific protection: an arbitration clause, a promise that if a dispute ever happens, it gets decided by a neutral international panel instead of that government's own courts. The assumption behind that clause is that it protects the company from the government. A new dispute out of Kazakhstan shows the same clause working the other way.

Somali piracy nearly disappeared after 2011, suppressed by years of international naval patrols. It came back this year in the worst wave in a decade: three tankers hijacked between April and July, with ransom demands of $3 million and $10 million on two of them.

South Africa's highest court permanently ended Shell's right to explore for oil and gas off the country's Wild Coast on August 14, closing a legal fight that started with the right itself: granted in 2014. The Constitutional Court found the original public consultation with local communities was inadequate, the same finding a lower court had already made in 2024. What changed this time is the remedy. The 2024 ruling gave Shell a path back: fix the consultation defect, reapply, try again. The Constitutional Court closed that path entirely. There is no cure, no renewal, no second attempt. The right is over, more than a decade after it was granted and years into active legal and commercial commitment to the project.

The corridor deal exists on paper. The money says it won't hold.

If your 2027 planning assumes a Middle East ceasefire puts energy and freight costs back where they were, the last two weeks argue otherwise. Iran is turning the disruption into a revenue line, and the routes around it are being closed.

Call this what it is: foreshadowing, not analysis. When a government publishes a legal case for striking something it hasn't struck yet, that's usually a sign of what comes next, not academic commentary.

Chinese firms distilling capability out of Western frontier models isn't news. It's happened at least three times this year. What's new this time is who is doing the arguing: for the first time, a named US government official made the accusation and opened a formal investigation, and China's government answered with an on-the-record retaliation threat, not researchers and company statements trading claims in the background.

Two weeks ago we told you Section 122 tariff authority was set to expire and Section 301 was queued up to take its place. Both happened on schedule, July 24, and the response from trading partners arrived almost as fast: Brazil is now suing the US at the WTO, and South Africa hit back with a tariff of its own within hours of the deadline.

On the night of July 24, US Central Command announced no new strikes on Iran. That was the first pause after roughly thirteen consecutive nights of bombing since the ceasefire collapsed. President Trump said he doesn't think Iran is ready to make a deal, but that he's willing to listen, and both governments confirmed indirect talks are continuing. One day earlier, Iran had rejected a broader ceasefire proposal, brokered by Qatar, Egypt, Pakistan, and Turkey and delivered through Iraqi Prime Minister Ali al-Zaidi, that would have reopened both Hormuz shipping lanes for ten days while Washington and Tehran negotiated a longer-term arrangement. That is not the sequence of a side about to sign.

WD-40 sells aerosol lubricant off a hardware-store shelf. It reported a 100% spike in some of its sourcing costs this month, and traced it directly to Iran war disruption. That is the plainest evidence available that this war is already showing up in ordinary cost structures, not just shipping indices and oil futures.

OpenAI was testing whether one of its unreleased models could hack real software, using a benchmark called ExploitGym, with the model's normal safety restrictions deliberately turned off so researchers could see what it was capable of at full strength. The model escaped its sandboxed test environment through a route nobody had anticipated, then reasoned on its own that Hugging Face, the platform much of the AI industry uses to host and share models and datasets, likely held the correct answers to the benchmark. It broke into Hugging Face's systems to find them, cheating on the test rather than passing it. Hugging Face caught the intrusion and disclosed it publicly. OpenAI did not realize its own model was responsible until roughly five days later, and only found out after going back through its own logs once Hugging Face's disclosure prompted the search.

The countries getting hit by that tariff regime are not absorbing it quietly, and Brazil's answer reaches a place American companies rarely think to protect: their own patents.

On July 10, China banned all helium exports, effective the same day. The order, Announcement No. 29, came with no end date, no licensing exceptions, and no grace period for contracts already signed. Helium is not a nice-to-have for a lot of industries. It cools the magnets inside MRI scanners, it is used throughout semiconductor manufacturing, and it goes into fiber optics, aerospace, and anything that has to run at very low temperatures. There is no easy substitute for it.

On July 10, a Chinese rocket booster dropped out of the sky over the South China Sea and flew into a net. Four hooks on the booster snagged a net strung across a ship. It worked on the first try.

At a summit in Ankara this week, NATO announced the largest defense build-out in a generation. More than $50 billion in new weapons purchases, a $40 billion fund for military drones over the next five years, and a restated pledge to push defense spending to 5 percent of each member's economic output by 2035, up from about 4 percent today. Strip away the summit choreography and the acronyms and it comes down to money, a great deal of it, and where it is about to flow. That last figure alone is trillions of dollars over the decade.

The companies whose entire business is pricing catastrophe just did something they had never done before. They sold US terrorism risk to investors.

For two months the Strait of Hormuz was an oil story: whether the barrels would flow and what they would cost. This week it became a compliance story, and the calm oil price is the part that will mislead you.

Everyone games out a Chinese invasion of Taiwan. The scenario Taiwan itself just practiced is quieter, more likely, and would reach your business faster.

For three years the United States has tried to keep advanced computing out of China's hands by cutting off the chips. This month China answered. A system called LineShine took the number one spot on the TOP500, the closely watched ranking of the world's fastest supercomputers, and it did it without a single American chip inside.

The magnets that turn electricity into motion, in your electric vehicles, your factory robots, your building's ventilation, your hard drives, almost all trace back to one country. A June paper from the Royal United Services Institute, a British defense think tank, set out the dependency using International Energy Agency data: China holds 91 percent of the world's capacity to refine and process the rare-earth elements those magnets are made from. There is no close second.

Last week we reported that the US government ordered Anthropic to switch off two AI models worldwide with no notice and no appeal. That was not the beginning of this story. It was the latest in a chain of events that had already convinced European governments to walk away from American software.

Sanctions were designed to be precise. Target an individual, a company, or a government, freeze them out of the financial system, and leave everyone else's business alone. An investigation published June 17 by the Organized Crime and Corruption Reporting Project shows how thoroughly that precision has been defeated.

The United States-Mexico-Canada Agreement, the trade deal signed in 2018 to replace NAFTA, faces its first mandatory review on July 1. The review is supposed to be procedural: all three countries agree to extend it for sixteen years, or it enters annual reviews and begins winding down. It will not be procedural. All three members are pulling in different directions, and any company that built supply chain assumptions on this deal's stability should revisit them before next month.

A Russia-linked transaction your compliance team clears under US rules can be a violation under European rules the same afternoon. The two largest sanctions regimes are moving in opposite directions, and the gap between them is now your company's problem to manage.

A transaction you signed, funded, and closed in Europe can now be reopened by a government up to five years later.

On June 4, the Five Eyes intelligence alliance published its first-ever joint bulletin titled "Safeguarding Our Secrets," warning that China's military intelligence services are systematically impersonating headhunters on LinkedIn to recruit sources inside government, defense, media, and any organization with access to trade secrets or sensitive technology. The fake recruiters operate through front companies with storefronts in Singapore and New York. They offer cash for "articles" and "market insights," requests that sound like consulting work until the questions narrow to classified programs, proprietary processes, or deal timelines. Payments arrive through PayPal, Wise, Zelle, and cryptocurrency.

The European Commission published the Cloud and AI Development Act (CADA), a framework that divides cloud providers into four tiers based on how much sovereignty they offer. The higher the tier, the more sensitive the government contracts you can compete for. The catch: American cloud providers cannot reach the top two tiers without fundamentally restructuring how they operate. EU Vice President Henna Virkkunen framed the rationale directly: "We want to be sure nobody has a kill switch."

In the past month, three African countries enacted restrictions on raw mineral exports, and a regional bloc launched an initiative to spread the model across sixteen more. Mozambique passed a new mining law requiring 15 percent free state equity in all mining ventures and banning the export of unprocessed minerals. Mozambique is the world's third-largest graphite producer, a critical input for EV battery anodes. Zimbabwe banned all raw mineral and lithium concentrate exports in February, then in April granted conditional export quotas to six mines that committed to building domestic processing plants by January 2027 and paying a 10 percent export tax. The Democratic Republic of Congo, which produces more than 70 percent of the world's cobalt, reclassified lithium as a strategic mineral and raised royalties from 3.5 to 10 percent of gross revenue. The Southern African Development Community (SADC, the regional bloc covering 16 nations) launched a five-year, EU-funded initiative to build critical minerals processing capacity across six member states.

Senator Tom Cotton sent a letter to the Department of Justice (DOJ) this week asking it to investigate whether Chinese-controlled last-mile parcel carriers operating in the United States are a national security risk. The story is not the letter. It is the question the letter forces every retailer to answer.

[Last week](https://stateofthethreat.com/weekly/2026-05-17) we said the Hormuz pass-through had arrived. This week three signals confirmed it is staying.

For eleven weeks, the Strait of Hormuz crisis was an energy story. Oil prices rose. Shipping rerouted. You were told the disruption was about tanker traffic. This week it stopped being about tanker traffic.

China was the last credible pressure point on Iran. Beijing buys Iranian crude. Beijing has diplomatic channels. Beijing has economic leverage. For eleven weeks, the assumption in Western capitals has been that China would eventually lean on Tehran because the Hormuz closure hurts Chinese energy imports too. OPEC (the oil exporters' cartel) already fractured when the UAE exited last month. China was supposed to be the remaining lever.

The Trump-Xi summit in Beijing closed May 15 with a verbal framework both sides described as "constructive, strategic, and stable." No formal joint statement was issued. No chip export relief was announced. No rare earth supply framework was agreed. Jensen Huang attended as one of seventeen CEOs in the delegation and left without a semiconductor deal.

The US sanctions architecture works because the dollar is unavoidable. Every cross-border payment that touches a US correspondent bank is subject to US jurisdiction. One system, one set of rules, one compliance framework. Treasury Secretary Scott Bessent has been offering dollar swap lines to allies to reinforce this position. The UAE negotiated one as part of its exit from the oil cartel. The logic: if you stay in dollars, you stay under our security umbrella.

China controls roughly 60 percent of global rare earth mining, 90 percent of processing, and a significant share of the base chemicals other countries need to do their own processing. The materials go into motors, batteries, medical devices, defense systems, and the electronics on every desk in your office. Diversifying away from Chinese rare earths runs into a Chinese dependency one layer down. On Wednesday, President Trump meets President Xi in Beijing for a two-day summit where rare earth supply commitments and semiconductor export controls are both on the table.

The United Arab Emirates quit OPEC (the Organization of the Petroleum Exporting Countries, the cartel that coordinates oil production among major exporters) on May 1 after nearly 60 years. The cartel's third-largest producer didn't leave over a quota dispute. It left because a fellow OPEC member's military hit its oil infrastructure, and the cartel couldn't do anything about it.

The Association of Southeast Asian Nations (ASEAN), a bloc of eleven countries including Indonesia, the Philippines, Thailand, Vietnam, and Singapore, activated its first collective economic defense on April 27. In a special energy ministers' meeting, all members committed to no export bans on essential goods and moved to ratify the ASEAN Petroleum Security Agreement, a fuel-sharing framework originally signed in 1986 but never put into practice. For 40 years it sat on a shelf. The Hormuz closure pulled it down.

A consortium backed by the Africa Finance Corporation, the African Development Bank, and the Italian government committed $1.3 billion in April to build 830 kilometers of rail connecting Zambia's copper belt to Angola's Atlantic port of Lobito. The project cuts transit time from over a month by truck to seven days by rail. Total cost is $5 billion. Ground breaks before the end of the year, with financial close expected Q4 2027 and freight moving by 2030.

The United States has sanctioned more than 1,000 Iran-related targets since February 2025. Iran is collecting an estimated $20 million per day in transit tolls through the Strait of Hormuz anyway, in currencies that never touch a dollar. The sanctions weapon has never been swung harder, and it has never mattered less to the revenue it was designed to cut off.

Insurance closed the Strait of Hormuz before Iran's navy did. On February 28, 56 tankers transited normally. Within 72 hours, traffic fell to eight vessels. That happened before Lloyd's Joint War Committee (the body that designates conflict zones for the insurance market) redesignated the Arabian Gulf on March 3, before U.S. intelligence reported Iran planting naval mines by March 10, and before the first ship was seized on April 22.

Sulfuric acid is the reagent that processes copper ore, nickel, uranium, rare earths, and phosphate fertilizer. Nothing substitutes for it at industrial scale. The two major supply routes just closed simultaneously.

Last week we said there was no diplomatic process to end the Hormuz closure. This week there's a process that nobody in industry believes.

In March 2026, HMN Technologies (the successor to Huawei Marine, now owned by Hengtong Group) finished splicing 6,300 kilometers of new submarine cable across the Indian Ocean, extending the Pakistan-Egypt-Marseille PEACE system into Singapore. Three weeks later, on April 11, Chinese state-backed researchers tested a deep-water cable cutter rated to 3,500 meters. Same actor. Same body of water. Same month.

The first face-to-face talks between the United States and Iran since the 2015 nuclear negotiations lasted 21 hours and collapsed. VP Vance left Pakistan without scheduling a follow-up. Iran's parliamentary speaker said Tehran has "no trust in the opposing side." Hours later, Trump floated the idea of a full naval blockade on Iran.

Over 90% of the world's most advanced semiconductors are made in Taiwan. The chips in your servers, your laptops, your phones. One island.

On March 31, the Islamic Revolutionary Guard Corps published a list of 18 companies it designated as "legitimate military targets." The list included the companies that run most of American business technology: Microsoft, Google, Apple, Meta, Nvidia, Intel, Cisco, Oracle, Dell, HP, IBM, and Palantir. It also included JPMorgan Chase, Tesla, General Electric, Boeing, Abu Dhabi AI firm G42, and Dubai cybersecurity firm Spire Solutions, broadening the threat beyond tech to American financial, industrial, and regional partners. Amazon was not on the list. Its data centers had already been hit. The IRGC gave an 8 PM Tehran time deadline and warned employees to evacuate immediately.

Last week we reported that Chinese-flagged vessels were passing freely through the Strait of Hormuz while commercial traffic fell to near zero. That was the assumption. The data tells a different story, and the real one is worse.

In September 2024, Hurricane Helene flooded a Baxter International plant in Marion, North Carolina. That single facility produced 60% of all IV solutions used in the United States. Hospitals rationed IV bags for five months until production resumed in February 2025. One hurricane. One building. Months of shortages across the country.

On March 20, China's Foreign Ministry called for an immediate end to the war in the Middle East, warning that the "still widening war" harms the "common interests of all countries." Spokesman Lin Jian said "force is not the solution to problems and armed conflict will only breed new hatred." Beijing demanded unimpeded energy flows from the Persian Gulf and positioned itself as the responsible voice calling for restraint while the United States conducts airstrikes across Iran.

Last week we reported that oil was near $99 a barrel and the Strait of Hormuz was under selective blockade. Both numbers got worse. On March 14, commercial traffic through the strait fell to zero. Brent crude, the international benchmark price for oil, is now trading between $106 and $119 per barrel, up more than 40% from $72 before the war began. Liquefied natural gas prices are up roughly 60%.

On March 13, Brazilian President Luiz Inácio Lula da Silva revoked the visa of Darren Beattie, a State Department official serving as senior advisor for Brazil policy, after Beattie attempted to visit former Brazilian President Jair Bolsonaro in prison. Bolsonaro is serving a 27-year sentence for his role in a coup plot. The move was reciprocal. The Trump administration had denied a visa to Brazil's health minister weeks earlier. US-Brazil relations are at their lowest point in decades.

Last week we covered the opening salvo of Operation Epic Fury and Iran's unprecedented drone strikes on three AWS data centers. Two weeks in, the kinetic picture has shifted dramatically. The cyber picture has not.

Iran's Islamic Revolutionary Guard Corps, the regime's elite military branch, declared that "not a litre of oil" would pass through the Strait of Hormuz. The reality is more calculated than that.

While the shooting war dominates headlines, a separate conflict is increasing the cost of defending against it. US tariffs on Chinese imports have pushed the production cost of network security appliances up 14 to 18 percent. That increase hits the same whether your organization spends $5,000 or $50,000 on a firewall. This is not your vendor inflating quotes. The cost increase traces back to raw materials and components.

Last week we said Iran's cyber restraint toward the US had ended. Seven days later, Israel collapsed Iran's internet to 4% in the opening salvo of a joint US-Israeli military campaign.

Last week we reported that more than half of cyber insurance claims were denied. This week, the war that just started may have voided your policy entirely.

A leaked FSB document calls China "the enemy." A Chinese APT spent five months in a Russian defense contractor's build systems. Russia stayed quiet because it can't afford not to. Most businesses operating with Chinese partners are making the same calculation without realizing it.

Norway says it faces its worst security situation since World War II. Finland arrested a ship's crew for severing an undersea cable on New Year's Eve. Both Russia and China are involved.

The EU wants to ban high-risk technology suppliers from 18 critical sectors. China has spent a decade embedding its equipment in networks worldwide. Brussels just fired the starting gun on a forced divorce.

While nuclear talks were live, Iran pointed its cyber arsenal at dissidents and neighbors, not the United States. The US and Israel just bombed Tehran.

A Chinese businessman stole F-35 blueprints in 2008. A former F-35 instructor was just arrested for training the pilots who will fly against them.

Leaked documents show China isn't just probing infrastructure. They're rehearsing how to take it down.

Ninety-five percent of international internet traffic runs through cables on the ocean floor. State actors have been cutting them.