Greetings from Copenhagen.

There’s plenty of geopolitical tension to unpack this week, with three major developments over just the past few days: 1) an Indian attack on Pakistan, 2) new events in the Middle East, and 3) the launch of U.S.–China trade talks.

India attacked Pakistan in the Kashmir region overnight, and Pakistan swiftly retaliated. This naturally sparked fears of a broader conflict, especially given that both countries possess nuclear weapons. However, the rhetoric on both sides has been relatively restrained, aimed at containing the situation rather than escalating it. Neither country framed this as an existential conflict or called for broader mobilization. The exchange appears designed to satisfy India’s need for reprisal after the recent terror attack, while allowing Pakistan to save face. Indian equities seemed to take it in stride—perhaps recognizing that this may be the full extent of the response. We’ll see. What’s particularly interesting is Russia’s potential role in brokering a resolution, while China has notably taken a back seat—even though this conflict is unfolding in its own backyard.

In the Middle East, President Trump declared that the Houthis in Yemen had “surrendered.” That’s only partly accurate. They appear to have agreed not to attack U.S. shipping—but that doesn’t necessarily extend to Israeli or possibly even European ships. So we’re effectively back to where we were before the U.S. bombing campaign and Israel’s renewed offensive in Gaza. This creates a window for some vessels to pass through the Suez Canal—but whether that’s enough to reduce insurance risk premia remains to be seen. It could be months before we see a meaningful return of international shipping through the Suez, if at all.

We are seeing marginal increases in freight volumes on the news that Bessent is meeting with Chinese trade officials. But is it enough to reverse the weakening outlook for commodities? Beyond precious metals, the picture remains bleak as demand continues to decline.

Chart 1: Freight Volumes Are Increasing, but Is It Enough?