Strategic spillover

This week in a brief

The war in the Middle East is increasingly spilling beyond the region’s two main maritime chokepoints into Saudi territory, energy infrastructure, and the global economy. The interception of a drone south of Mecca turned the security of Islam’s holy cities into a regional issue, dwindling Saudi interceptor stocks pushed Riyadh to seek outside assistance, and the attack on the East West Pipeline showed that even the route designed to bypass the Strait of Hormuz remains vulnerable. At the same time, the Houthis expanded their hold around Bab el Mandeb, while China and BRICS sought to create diplomatic space for de escalation. Beyond the Middle East, the approaching Trump Xi summit is placing Taiwan, artificial intelligence, and semiconductors at the center of bargaining between the two powers, Canada and the European Union are exploring a new institutional framework, and elections in Europe and Russia continue to reflect broader political shifts and changing attitudes toward the war.

Geopolitical Dynamics

BRICS seeks a common position on the war in the Middle East: The summit in New Delhi concluded with a unanimous declaration expressing deep concern over the escalation in the Middle East and calling for maximum restraint. The consensus is notable because the bloc includes both Iran and the United Arab Emirates. On the sidelines of the summit, Iran’s president met Abu Dhabi’s crown prince in the highest level meeting between the two sides since the war began. China also used the summit to promote cooperation on supply chains, special economic zones, and open source artificial intelligence.

China again calls for reopening Hormuz and returning to the interim agreement with Iran: During a meeting in Beijing with Iran’s foreign minister, China urged Iran and the United States to “exercise restraint,” return to the interim agreement reached in June, and take steps toward an early reopening of the Strait of Hormuz in order to ease pressure on energy prices. Beijing also made clear that it does not want the fighting to spread further into Yemen and the Red Sea, against the backdrop of the upcoming Trump Xi summit and recent Houthi territorial gains.

Taiwan becomes a bargaining chip ahead of the Trump Xi summit: Concerns are growing in Tokyo and Taipei that Washington could soften its position on Taiwan in exchange for economic gains from Beijing. A roughly $14 billion arms package for Taiwan has been awaiting approval since May and is being viewed as a possible bargaining chip. At the same time, competition between the United States and China over artificial intelligence and semiconductors is expected to feature prominently in the talks, giving Taiwan additional strategic weight because of its central role in global chip production.

The European Union offers Canada a new status: The president of the European Commission proposed granting Canada the status of an “associate member” of the EU, a category that does not currently exist under the bloc’s treaties. Full membership is not possible, but both sides are working to deepen cooperation in trade, security, and digital policy ahead of a summit in Montreal in October. The US president described the idea as “ridiculous” and threatened further tariffs if he viewed the move as hostile.

Security and Threats

Saudi Arabia defines the security of Mecca as a red line: Saudi Arabia said it intercepted a Houthi drone south of Mecca before it entered the city’s airspace. Riyadh made clear that the security of Islam’s holy cities is a red line, while the Organization of Islamic Cooperation, representing 57 states, said attacks on Mecca and Medina would be unacceptable. The Houthis denied intending to strike Mecca and said their targets were distant oil and military facilities. An emergency UN Security Council meeting on Yemen and the Red Sea was also convened, but ended without a binding decision.

Eroding Saudi interceptor stocks lead Riyadh to seek outside assistance: Saudi Arabia requested air defense support from France, Pakistan, Egypt, and the United Kingdom as its interceptor stocks continue to decline. At the same time, the United States held direct talks with Houthi representatives at its embassy in Muscat through Omani mediation. The Houthis said they do not intend to target US vessels and remain committed to the 2025 ceasefire. Washington is currently ruling out direct military intervention and is offering Saudi Arabia intelligence and targeting support, while there has so far been no indication that the Makkah Pact will be activated as a framework for defending the kingdom.

A Russian drone strikes a passenger train two kilometers from the Polish border: No casualties were reported after the train was evacuated. Ukraine raised the possibility that the intended target was a diplomatic train that had departed earlier than scheduled. Poland’s foreign minister described the incident as another escalation on NATO’s doorstep.

Economy, Technology and Trade

Even the route designed to bypass Hormuz comes under attack: Drone strikes disabled Saudi Arabia’s 1,200 kilometer East West Pipeline, which had been carrying roughly 4 million barrels of oil per day to Yanbu as an alternative to the Strait of Hormuz. Loadings at Yanbu were suspended and cargoes bound for Europe were canceled. Brent crude stood at around $103.95 a barrel, WTI at roughly $100.66, while US retail diesel reached a record of about $6.31 per gallon. Estimates for repairing the pipeline range from a few days to five or six weeks.

The Federal Reserve raises interest rates by a quarter point to 3.75%–4%: This was the first rate increase in three years, and most Fed officials expect at least one additional increase this year. The war and the surge in energy prices are now feeding through from oil markets into the monetary policy of the world’s largest economy.

Crises and Domestic Politics

Russia prepares for Duma elections without the only registered party openly opposed to the war on the national party list: All 450 seats in the State Duma will be contested, while the ruling party is seeking to preserve its constitutional majority of at least 300 seats. At the same time, the Supreme Court barred Yabloko, the only registered party openly opposing the war, from competing through its national party list. The elections will take place without OSCE observers and will also be held in Crimea and in Ukrainian territories occupied by Russia.

Sweden moves toward a change of government by the narrowest of margins: With roughly 99% of votes counted, the center left bloc holds 175 of the Riksdag’s 349 seats, compared with 174 for the right wing bloc. If the result holds, the Social Democrats could return to power, but with the smallest possible majority. The result also weakens, at least for now, the Sweden Democrats, a nationalist and anti immigration party that has supported the right wing government from outside since 2022. In that sense, Sweden stands out as a partial exception to a broader European trend in which nationalist and anti immigration parties have gained ground and pushed even mainstream parties toward tougher positions on migration, borders, and national identity.

“Surely goodness and mercy shall follow” (Psalm 23).

The Geopolitics Lab Team