This week, the United States suspended military aid and intelligence sharing with Ukraine, while European leaders proposed initiatives on Ukrainian and European security. In the Indo-Pacific, China announced it will impose retaliatory tariffs of 15% on key U.S. agricultural imports, and Taiwan announced it will increase its investment in the U.S. semiconductor industry. In the Middle East, Israel cut off humanitarian aid into Gaza, while the U.S. and Arab states contended over a Gaza reconstruction plan. President Donald Trump imposed his previously delayed 25% tariffs on Canada and Mexico before making exemptions for car imports following a steep drop in the U.S. stock market.
Weekly Forecast Monitor: March 7
The Geopolitical Hotspots Monitor examines the outlook for key geopolitical hotspots around the world.
1 Russia/Ukraine Conflict
Summary
The Russia/Ukraine war trended toward diplomatic de-escalation as the U.S. suspended military aid to and ceased intelligence sharing with Ukraine and the White House ordered the U.S. Treasury and State departments to prepare options for Russian sanctions relief. Ukrainian President Volodymyr Zelenskyy proposed a temporary cease-fire and worked to repair his relationship with Trump after a public falling out last week, reaching out directly and publicly on social media to express his gratitude for U.S. aid and his willingness to salvage a deal for Ukraine’s rare earth minerals. Meanwhile, French President Emmanuel Macron said he is open to extending the protection of France’s nuclear umbrella to European allies.
2 Middle East
Summary
Conflict in the Middle East trended toward diplomatic de-escalation and military escalation scenarios as U.S. Special Envoy for Hostage Affairs Adam Boehler met directly with Hamas negotiators in Doha and Egypt publicly released a $53 billion Gaza reconstruction plan that the Arab League backed unanimously but the U.S. and Israel rejected. Israeli drones killed at least two people in Rafah, as Hamas refused Israel’s proposal to extend Phase I of the cease-fire and Israel cut off humanitarian aid into Gaza. Meanwhile, Israel expanded its campaign in the West Bank by demolishing homes in the Nur Shams refugee camp, where around 13,000 Palestinians have been displaced since January. Russia offered to facilitate discussions between Iran and the U.S. over Iran’s nuclear program, as Trump sent a letter to Iran’s Supreme Leader Ayatollah Ali Khamenei offering to begin negotiations and the U.S. considered a campaign to intercept and inspect Iranian ships for oil and weapons shipments. The Turkish Defense Ministry called for the disarmament of the Kurdistan Workers’ Party after the militant group declared a cease-fire on March 1.
3 U.S./China/Indo-Pacific
Summary
Tensions in the Indo-Pacific trended toward hybrid escalation as China announced it would impose retaliatory 15% tariffs against the U.S. on $21 billion worth of agricultural imports, followed by a statement that it was ready to fight “a tariff war, a trade war or any other type of war” with the United States. Taiwan Semiconductor Manufacturing Company announced it would open six new semiconductor research and fabrication centers in the U.S., pledging to invest $100 billion. China pledged to increase its annual defense budget by 7.2% during its annual parliamentary session, as well as increases to the country’s “diplomatic endeavors.”
4 Other Hotspots
United States/Canada/Mexico
The U.S. imposed previously delayed 25% tariffs on all imports from Canada and Mexico, causing stocks to plummet and Canada to announce retaliatory measures after warning of an “existential threat” from the United States. Trump has since announced that imports of automobiles and any goods subject to the USMCA agreement would have a one-month tariff exemption. Forecast – hybrid escalation scenario
European Union
The EU has drawn up plans to increase the bloc’s defense and security, with plans from the European Commission to mobilize €800 billion over the next four years for joint re-armament. while German Chancellor-elect Friedrich Merz announced a new defense spending bill. Forecast – military escalation scenario
Sudan
The U.N. Security Council expressed concern about Sudan’s paramilitary Rapid Support Forces signing a charter last month with the aim to establish an alternate government, citing the increased risk of violence and worsening of humanitarian conditions. Forecast – security destabilization scenario
The Global Connectivity Tracker examines the impact of geopolitical dynamics on key themes like trade, technology, and energy/climate.
1
Russia/United States
Natural Gas
What Happened
The German tabloid Bild reported that Russian and U.S. officials discussed restarting the Nord Stream 2 pipeline to ship natural gas from Russia to Germany.
Significance/Outlook
The 764-mile-long, 55-billion-cubic-meter-per-year pipeline is currently under US sanctions. The discussions are part of Trump’s efforts to restore relations with Russia and reach an agreement that will end the Russia/Ukraine war. Using American investors, an agreement with input from Europe or Germany might provide the U.S. with influence over gas exports coming from Russia via Nord Stream 2. If U.S. sanctions against Russia are lifted, low-price natural gas will flow to Germany and other European countries under this deal.
2
United States/Iran
Oil
These sanctions are a continuation of Biden’s measures, albeit with an intensified “maximum pressure” approach under Trump. Iran has become skilled at evading restrictions through alternative trade and financial networks. While they may add economic strain, they are unlikely to significantly disrupt Iran’s revenue flow. The main risk lies in heightened tensions in the Persian Gulf, particularly in the Strait of Hormuz, where Iran could retaliate by targeting commercial vessels or oil shipments.
What Happened
The Trump administration has announced a new set of sanctions targeting individuals and entities involved in Iran’s oil trade.
Significance/Outlook
These measures affect more than 30 individuals and vessels across multiple jurisdictions for their role in facilitating the sale and transportation of Iranian petroleum-related products. The sanctions target oil brokers in the UAE and Hong Kong, tanker operators and managers in India and China, and senior officials from Iran’s National Iranian Oil Company and Iranian Oil Terminals Company. As part of his renewed “maximum pressure” campaign, Trump aims to halt Iran’s nuclear advancements and oil exports. The U.S. Treasury Department has emphasized that Iran relies on oil revenues to fund its nuclear and missile programs. Reports also indicate that the administration is considering stopping and inspecting Iranian oil tankers transiting the Persian Gulf, further escalating tensions and adding to market uncertainty. This move underscores Trump’s return to a hard-line stance on Iran, reaffirming economic pressure as his primary tool for containment.
3
United States/Venezuela
Oil
The U.S. will have tough time finding a replacement for Canadian oil as consequence of Trump’s new tariffs and possible Canadian retaliation for the energy sector. Venezuela's economy will also suffer. Venezuela has the world's largest proven oil reserves, but production has fallen steadily due to corruption, mismanagement, and U.S. economic sanctions.
What Happened
Trump announced the end of a Biden administration deal that allowed Chevron to pump and export Venezuelan oil despite U.S. sanctions.
Significance/Outlook
Trump made this decision in response to last year’s Venezuela presidential election that the U.S. considers undemocratic and President Nicolás Maduro’s reluctance to accept deported Venezuelan migrants. Chevron represents more than a quarter of Venezuela’s oil exports, and the Venezuelan opposition estimates that Maduro’s regime has received $4 billion from the permit.
4
OPEC+
Oil
What Happened
OPEC+ announced its first oil production increase since 2022 with plans to add approximately 138,000 barrels per day starting in April.
Significance/Outlook
According to OPEC+, the gradual easing of production cuts will take place from April 2025 to September 2026, with adjustments based on market conditions. Some analysts suggest the move reflects pressure from Trump to lower oil prices, aligning with his broader energy policy goals. Oil prices fell sharply following the announcement, with Brent crude dropping from around $75 to a six-month low of $71 per barrel. The decline reflects market expectations that increased supply will pressure prices, despite ongoing geopolitical uncertainties, including U.S. sanctions on Russia and Iran, and the ongoing global tariff war. The decision highlights OPEC+’s balancing act between stabilizing oil markets and navigating economic and geopolitical pressures, with future price volatility likely depending on demand trends and global policy shifts.
5
Japan
Climate
The Japanese government seems to be able to manage the situation, with no immediate national crisis. While the disaster has raised concerns over potential power disruptions and infrastructure damage, these risks are minimal given Japan’s resilient infrastructure and effective emergency response systems. This incident, however, underscores Japan’s rising climate risk and the need for enhanced wildfire prevention and emergency response strategies amid rising extreme weather events.
What Happened
Japan is facing its most severe wildfire in decades.
Significance/Outlook
The wildfire, which began Feb. 26 in Ofunato, Iwate prefecture, has burned approximately 1,200 hectares. It has led to the evacuation of 1,000 residents, with 80 buildings damaged and at least one fatality reported. Local authorities and the Self-Defense Forces have been deployed. The cause remains under investigation, but dry conditions, strong winds, and prolonged drought have played a key role in fueling the fire. Two other fires in Yamanashi and Iwate have strained emergency resources.
