Weekly Forecast Monitor: Oct. 4, 2024

Summary 

Tensions in the Middle East trended toward military and hybrid escalation scenarios as Israel killed Hezbollah chief Hassan Nasrallah, continued bombing campaigns in Gaza and Lebanon, and initiated a ground invasion of southern Lebanon to combat Hezbollah forces. Iran targeted Israel with nearly 200 ballistic missiles, prompting Israeli leaders to vow strong retaliation.

Forecast indicators 

Military escalation scenario 

• Israel launched an invasion of Lebanon and is engaged in ground combat with Hezbollah fighters for the first time since 2006. Israel’s stated campaign objective is to destroy the militant group’s positions in Lebanon’s south and allow displaced Israelis to return to their homes near the Israeli-Lebanese border.
• Iran fired a barrage of nearly 200 ballistic missiles at Israel in retaliation for the recent killing of senior Hamas and Hezbollah leaders.
• An Israeli bombardment killed dozens of Palestinians in Gaza, and an attack in Jaffa claimed by Hamas killed six Israelis.
• Israel intercepted a drone that al-Houthi militants launched at Tel Aviv from Yemen.
• Over 1 million people are estimated to be displaced inside Lebanon as a result of Israeli military operations. Of those, upwards of 100,000 are seeking refuge in Syria, including Syrian refugees who previously had sought safety in Lebanon.
• Numerous Israeli soldiers were wounded in a firefight with Palestinian militants outside Nabulus in the West Bank, while an Israeli airstrike targeting a Hamas leader in Tulkarem killed 18 Palestinians.

Hybrid escalation scenario 

• Iranian oil tankers are leaving Kharg Island, the location of Iran’s most crucial oil export terminal, in anticipation of potential Israeli attacks.
• Houthi militants hit one ship with a missile and another with an explosive drone in the Red Sea. One ship was flagged under Panama, while the second has not been identified.
• Israel is reportedly considering targeting oil infrastructure in Iran to inflict economic damage in retaliation for Iran’s recent ballistic missile barrage.

Diplomatic de-escalation scenario 

• U.S. President Joe Biden has announced that he will not support Israeli strikes against Iranian nuclear facilities, as Israeli Prime Minister Benjamin Netanyahu considers retaliatory options to Iran’s missile barrage. Israel has signaled it may not retaliate immediately.
• Russia declined to publicly back Iran’s decision to fire a large-scale missile barrage at Israel and called on all parties involved to demonstrate restraint.

Summary

Tensions in the Indo-Pacific trended toward a hybrid escalation scenario as the U.S. banned imports of steel and food additives from Chinese companies accused of human rights abuses. Taiwan received a new military aid package, which will include delivery of the first batch of U.S.-supplied Abrams battle tanks. Russia and China conducted a first joint Arctic patrol. The EU voted to impose tariffs on Chinese electric vehicles despite opposition by certain members.

Forecast indicators 

Military escalation scenario 

• Taiwan confirmed it will receive its first batch of M1A2T Abrams main battle tanks from the United States by the end of the year. The island also received a new $567 million military aid package from the U.S. this week.
• China conducted its first Arctic coast guard patrol with Russia, as both countries seek to cooperate in opening up Arctic trade routes.
• Chinese naval and air assets conducted combat readiness patrols in the South China Sea.
• Pyongyang is likely to revoke the Inter-Korean Basic Agreement, according to South Korea’s Unification Ministry.
• Chinese missile boats reportedly pursued Philippine vessels near the contested Half Moon Shoal.
• The People’s Liberation Army conducted drills in the South China Sea during China’s national day in response to a joint exercise between the U.S. and its allies in the same region.
• South Korea showcased its most powerful ballistic missile for the first time during the country’s Armed Forces Day in response to recent missile threats made by North Korea.
• Taiwan’s Ministry of National Defense tracked 32 Chinese aircraft and 13 naval vessels around the island, with 22 aircraft crossing the Taiwan Strait median line.

Hybrid escalation scenario 

• Beijing has been discouraging Chinese companies from buying Nvidia’s H20 chips, used in the development of AI models, and pressuring them to buy domestically sourced chips instead.
• The U.S. may impose new tariffs, ranging from about 3% to 23%, on imports of solar panels manufactured by Chinese companies operating in Malaysia, Vietnam, Thailand, and Cambodia.
• The U.S. imposed import bans on Baowu Group Xinjiang Bayi Iron and Steel and Changzhou Guanghui Food Ingredients, a food additives manufacturer, due to their reported use of forced Uyghur labor in their supply chain.
• The EU is moving ahead with the imposition of tariffs ranging from 7% to 35% on Chinese EVs, despite heavy lobbying against them from Germany, Hungary, and Spain.

Diplomatic de-escalation scenario 

• During an interview with government-published newspaper Rossiyskaya Gazeta, Russian Foreign Minister Sergei Lavrov officially affirmed Russia’s support for China on Taiwan, backing the former’s claims of territorial integrity.
• The United Kingdom is holding discussions with Beijing to prepare for a high-level meeting to negotiate new trade and investment agreements.
• Jay Shambaugh, U.S. Treasury undersecretary for international affairs, stated that continued discussions between Washington and Beijing have been forestalling Chinese retaliation against U.S. tariff increases.
• The newly elected Japanese foreign and defense ministers affirmed that they will not work on the new prime minister’s calls for the establishment of an “Asian NATO.”

Summary

Tensions in the Russia/Ukraine conflict trended toward military and hybrid escalation scenarios as Russia captured the town of Vuhledar in Donetsk and targeted Ukrainian cities with indiscriminate bombardment. Ukraine launched a large-scale drone strike into Russian territory and announced updates on its domestic drone production capability, and Russia signed an energy deal with Iran.

Forecast indicators 

Military escalation scenario 

• Russia bombarded civilian infrastructure in cities across Ukraine with missiles, drones, and artillery. Attacks on a medical center in Sumy and a market in Kherson caused significant civilian casualties.
• Russian forces continued their steady advance in Donetsk oblast with the capture of Vuhledar following the withdraw of Ukrainian forces. The loss of the city represents a strategic setback for Ukraine and follows two years of resistance by the Ukrainian army.
• Ukraine is now capable of domestically producing 4 million drones annually, Ukrainian President Volodymyr Zelenskyy said.
• Russian security officials reported shooting down upwards of 120 drones launched by Ukraine that had crossed into Russian territory.
• The Russian Ministry of Defense plans to conscript 133,000 men prior to the end of 2024, in addition to the 150,000 conscripted so far this year.

Hybrid escalation scenario 

• The security chief of the Zaporizhzhia nuclear power plant was killed in a car bombing in Russian occupied territory.
• Ukrainian officials reported that Russia poisoned the Seym River, which connects to a reservoir near Kyiv. The river lies within both Russia and Ukraine.
• U.S. security officials seized numerous online domain names used by hackers in an effort to stymie Russian intelligence hacks targeting U.S. government systems.
• Russia and China are conducting joint patrols in the Arctic for the first time.
• Russia and Iran deepened their energy cooperation with a 30-year deal to export Russian gas to Iran.

Diplomatic de-escalation scenario 

• The U.S. State Department described Zelenskyy’s ”victory plan” as “productive.” Details of the plan have not yet been made public.

United States

• U.S. vice presidential candidates Sen. J.D. Vance and Gov. Tim Walz held their only scheduled debate before national elections in November.
• Tens of thousands of longshoremen who had gone on strike at East and Gulf coast ports, demanding better contract terms from the U.S. Maritime Alliance, are back on the job. A tentative agreement brokered with the help of Biden administration officials resulted in a 62% wage increase. Biden toured states affected by Hurricane Helene. The administration’s response to these events could have a bearing on the presidential election.

Venezuela

• The Council of Europe awarded its 2024 rights prize to Venezuelan opposition figure Maria Corina Machado.
• The Carter Center legitimized the vote tallies of the opposition party, which showed incumbent President Nicolás Maduro lost the July election.

South Africa

• South Africa’s economic outlook continued to improve as fuel prices dropped to their lowest levels in over two years and stocks had their strongest third quarter in over a decade. Economic stabilization, driven by a reduction in scheduled electricity outages and the formation of the Government of National Unity, marks a period of South African financial recovery that will further boost investor confidence, despite growing water insecurity caused by overconsumption and faulty infrastructure.