Welcome to this week’s Great Game! There’s a whole lot to cover in geopolitics currently, so let’s get straight to it:

Peace in sight?

As presented last week, the US is looking at a complex ‘decision matrix’ in the Red Sea Crisis. The State Department have been working tirelessly with Arab partners such as Qatar and Egypt to broker a peace deal between Israel and Hamas, but Israel have ultimately rejected it. That was my “best solution” in the matrix that we presented last week. Meanwhile, the US are reportedly contemplating expanding their bombing campaign against the Houthis. This could initially seem to be linked to my “no-go” solution; an invasion of Yemen. However, in my opinion it should rather be seen as an attempt to reassure shipping companies by diminishing the threat of the Houthis and establishing a credible security guarantee. So you should absolutely have the solution matrix in mind when things go down in the Red Sea right now!

For Israel, the internal pressure for peace is growing rapidly, but Prime Minister Netanyahu has remained steadfast in his determination to continue the war until Hamas is defeated. The problem is that Israel is nowhere near defeating Hamas and it’s increasingly hard to see what Israel gain from continuing the war. Meanwhile, Netanyahu is looking at an almost certain end to his reign if he can’t deliver a good outcome of the war, so the pressure is immense on him.

All in all, I expect Netanyahu and Israel to cave in to the calls for peace within a matter of weeks, not months.

Spillover to oil

Last week also saw the first reports that the Red Sea crisis is also beginning to hinder the flow of oil tankers. That’s a very grim scenario for global inflation because energy prices are so interlinked to all other categories of goods and services. To make energy matters worse, Ukraine carried out a massive drone attack on the Ust-Luga LNG terminal in the Baltic Sea. It makes all the sense in the world for Ukraine to target Russian energy infrastructure and pushing up energy prices is a sure-fire way of increasing the pressure on both Europe and the US – as well as pulling China into the peace process. China is heavily reliant on energy imports from Russia and further destruction to the Russian oil and gas network will surely raise eyebrows in China and make them consider pushing Putin to the negotiating table.

We covered both these topics extensively in our Energy Cable yesterday, so make sure to follow my colleague Ulrik’s great coverage of the energy space to stay on top of things.

Iran-Pakistan War?
Finally, let me just touch upon a subject that we’ve received a bunch of questions on lately. Iran and Pakistan have been throwing missiles at each other, but there’s no risk of wider regional conflict. Both sides limited their attacks to Balochi terrorist groups within each other’s territories and in that way quite neatly contained the incidents.