A consuming fire
Israel, Palestine, Ukraine, Russia, North Korea, China, the EU, and the US.
The five things you need to know today:
ISRAEL. PALESTINE. Israel marks its independence divided and alone.
UKRAINE. RUSSIA. Kyiv signs a meaningless deal to save Trump face.
NORTH KOREA. RUSSIA. Moscow and Pyongyang look for a new purpose.
CHINA. EUROPE. Beijing plays charm offensive in Brussels.
UNITED STATES. Trump struggles on message, but markets don’t mind.
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ISRAEL. PALESTINE. Burnt offering
Israel marks its independence divided and alone.
Wildfires blocked the highway between Jerusalem and Tel Aviv on the eve of Independence Day Wednesday as official ceremonies were cancelled. Benjamin Netanyahu was heckled at a military memorial. The IDF struck militants in Syria.
INTELLIGENCE. The fires, some of which may have been deliberate, will need foreign help to put out. Netanyahu said Italy and Croatia would send planes, but sympathies in other parts of the EU are at a low. And as the war in Gaza shows little sign of progress, the risk of a new one in Syria has been raised again, notwithstanding Damascus's recent statements in support of eventual normalisation. Strikes have been made ostensibly in defence of the Druze minority.
FOR BUSINESS. Beyond defending the Jewish state, a new doctrine of sorts has emerged from Netanyahu's coalition government, seeking to defend all minorities across the region – including Druze, Alawites and Christians in Lebanon and Syria. The Druze, many of whom also live in Israel, may welcome Israel's strikes against their enemies, who may be linked to the Sunni regime in Damascus, but the Alawites, many of whom were once allied to Hezbollah, may baulk.
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UKRAINE. RUSSIA. Getting the rocks off
Kyiv signs a meaningless deal to save Trump face.
Scott Bessent and Ukraine's deputy prime minister signed a pact Wednesday for access to critical minerals jointly fund Ukraine's reconstruction. The EU was preparing a 'plan B' to support Kyiv, its chief diplomat told the Financial Times.
INTELLIGENCE. The deal seems to omit references to paying back the US for aid, or giving Washington a veto on any mineral project. And while it may serve Ukraine to have a piece of paper indicating US support for its sovereignty, ultimately, this looks to be about giving Donald Trump a face-saving way to claim victory before he decides what to do next with the war he cannot stop. A strike on Odesa killed two early Thursday. Russia said it was still “open to” peace.
FOR BUSINESS. Moscow won't stop the war unless there’s risk of direct conflict with Washington. The minerals deal won't change that calculus. And while Vladimir Putin's foot-dragging is annoying to Trump, it's unlikely to change the White House's calculus either. Europe's 'plan B' of replacing the US with military support, to assist a more acceptable peace for Ukraine, increasingly looks like the 'plan A'. Russia, meanwhile, is stationing more troops near the Baltic.
NORTH KOREA. RUSSIA. Bridge to nowhere
Moscow and Pyongyang look for a new purpose.
Pyongyang said Thursday a "significant" new road bridge was being built over the Tumen River to Russia's Primorsky Krai, several days after it acknowledged the assistance of its "hero" soldiers in helping Moscow to recapture Kursk.
INTELLIGENCE. The bridge will go between two small towns across the 11-mile border, and run alongside a rail bridge built in 1959. While Pyongyang’s assistance in the recapture of Kursk was significant (insofar as it helped give North Korean troops real experience), the two sides are unlikely to become more than allies of convenience, particularly if either repair ties with the US. The White House has been considering reengaging with the DPRK, Axios said Sunday.
FOR BUSINESS. China, which has an 840-mile border with North Korea (and 2,615 miles with Russia), has literally and figuratively stood in the way of closer ties for years. But as a hedge against Beijing’s might, Moscow and Pyongyang have wanted to show they have options. How these stack up to Russia’s hopes of greater energy links to China is another question. China last month rejected a Gazprom proposal to increase gas exports via Kazakhstan.
CHINA. EUROPE. My enemy’s frenemy
Beijing plays charm offensive in Brussels.
Beijing lifted sanctions on five MEPs Wednesday and urged Brussels to "meet halfway" following Xi Jinping’s call last month to "jointly resist unilateral bullying practices". State media Thursday said the US had reached out for a trade deal.
INTELLIGENCE. Beijing is primarily goading Washington – which yesterday admitted there'd been no direct talks despite Donald Trump's recent assertions – but it has genuine interests in Brussels as well, despite the two economies’ competition over manufacturing and differences over human rights. Since the ill-fated Franco-Mongol alliance in the 13th century, Sino-European deals have failed to stick, but the US could provide the best chance yet.
FOR BUSINESS. A grand bargain between Europe and China seems unlikely while issues like Russia, Xinjiang and IP theft continue. Further, any loss of trade with the US is likely to lead to industrial dumping, further exacerbating tensions. Yet a narrow path to a non-US trade pact exists, potentially brokered by mutually interested parties like Southeast Asia’s ASEAN and South America’s Mercosur, or the Trans-Pacific Partnership, which now includes Britain.
UNITED STATES. Not your grandfather’s trade war
Trump struggles on message, but markets don’t mind.
Donald Trump said Joe Biden was to blame for falling markets in his first 100 days and a trade war might mean “maybe the children will have two dolls instead of 30 dolls" at Christmas. The Senate rejected a bill to block Trump's tariff powers.
INTELLIGENCE. On his 100th day in office, GDP declined for the first quarter in three years, thanks to front-run imports and slower spending. A second contraction will mean recession, which betting markets now put at 62%. This may be forgotten by the time of the mid-terms, but falling growth and choppy prices increase the chance of financial risk. Regulatory structures have decreased the likelihood of another 2008, but the White House is now dismantling these.
FOR BUSINESS. Markets are surprisingly buoyant considering how much the world's economic fundamentals have changed in a month. Retail investors in equities, and stablecoins in bonds, are filling the place of institutional funds and sovereign wealth, but for how long this continues amid heightened policy risk is anyone's guess. Neither the S&P 500 nor the Treasury market is another GameStop or Reddit meme craze, but the same was once said of US politics.
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Michael Feller, Chief Strategist