What you need to know

Financial markets remain gripped by volatility, with the NASDAQ reversing early gains to close lower on Monday, a reflection of the precarious state of investor sentiment amid inconsistent and ambiguous tariff announcements from the U.S. administration. The exemptions granted—unclear in scope and liable to reversal—have failed to provide clarity, reinforcing a sense of policy drift an internal disorganization within the team(s) handling tariff policy and enforcement. Compounding the unease are deepening fault lines in the global bond market. Nowhere are these more apparent than in Japan, where the yield on 30-year government bonds has surged to 2.845%, the highest since 2004. This is not a regional quirk, but a signal of a broader structural shift. As the largest foreign holder of U.S. Treasuries and a pivotal player in the global carry trade, Japan’s rising yields have global consequences and suggests a growing loss of confidence in Japanese economic strength. Japanese institutions are increasingly repatriating capital, paring back exposure to U.S. dollar assets, and unwinding leveraged positions—thereby exerting pressure on U.S. bond yields and stoking currency-market volatility.

The upward movement in bond yields suggests that the long-standing deflationary regime underpinning risk assets in Japan may be unraveling. Japan has long served as a global anchor of ultra-low rates; but signs now that it cannot contain long-term borrowing costs signals that a wider repricing of risk may be underway.

Meanwhile, in Washington, fiscal inertia is compounding market uncertainty. The political reality is this: With neither major political party prepared to cut spending or raise taxes, the U.S. continues to run structural deficits equivalent to roughly 10% of GDP. DOGE’s attempts to trim $150 billion off the federal budget of $7.5 trillion (most of which is social security, Medicare, and Medicaid) is a drop in the ocean.

At the same time, the housing market remains increasingly out of reach for many Americans. The median asking price for a home hit a record $424,985 last week, a 6.3% increase year-on-year and nearly $50,000 higher than at the start of the year. The median sale price also climbed, reaching $383,750—the highest level since November 2024. With mortgage rates holding at around 6.7%, the typical monthly mortgage payment has soared to $2,807, exacerbating the affordability crisis. And housing stock is building up as potential buyers can’t afford to buy at current prices, with figures out of Orlando, Florida, showing that the amount of unsold homes on the market is now at about the same level as during the 2008 Global Financial Crisis.

Investor risk appetite also continues to weaken. In March, hedge funds executed their largest sell-off of global equities since 2013, with U.S. technology stocks suffering the most pronounced losses. This retreat helped fuel the deepest underperformance of the S&P 500 relative to global peers in 16 years.

Against this turbulent backdrop, monetary policy enters a delicate phase. Federal Reserve Chair Jerome Powell is due to step down in just over a year, and discussions about his successor are already in motion. The Trump administration, acutely aware of the economic drag imposed by the 2025 tariff regime, appears to be laying the groundwork for an easing cycle in 2026—anchored by a new appointee to lead the Fed and a renewed emphasis on stimulus.

In the search for safety, gold has regained its allure. Central banks acquired 24 tonnes in February, the largest monthly total since November 2024. Yet actual purchases may be higher. Goldman Sachs estimates that China alone bought 50 tonnes while officially reporting just 15. The bank now forecasts gold prices could reach $3,700 per ounce in 2025, with an upside potential of $4,500—historically record breaking highs by any measure. This latest wave of accumulation marks the 20th month of net buying in the past 21 months, contributing to what is poised to become the 16th consecutive year of net central bank purchases. In just three years, monetary authorities have added 3,176 tonnes of gold to their reserves. The implication is clear: central banks are preparing for a world marked by financial stress and geopolitical dislocation.

Birth pangs in the birthplace of civilization

As preparations intensify for the next phase of nuclear negotiations with Iran, uncertainty persists over the location of the talks—even as the strategic objectives of the Trump administration come into sharper focus.

Meanwhile, rhetoric from the White House has continued to be forceful. Speaking on Monday, President Donald Trump reiterated his demand that Iran fully abandon any pursuit of nuclear weapons, warning that Tehran was “fairly close” to developing one and vowing to take “very harsh” measures if necessary. “They cannot have a nuclear weapon,” he insisted, adding that he would act not only on behalf of the U.S. but for global security.

Nevertheless, despite the hawkish language, the administration’s actual policy appears more restrained.

In an interview with Fox News, Witkoff confirmed that Washington no longer seeks the full dismantling of Iran’s nuclear program. Rather, the goal is to limit uranium enrichment and prevent weaponization—an approach partially aligned with the contours of the 2015 Joint Comprehensive Plan of Action of the Obama administration (though Obama did not address the question of missiles and weaponization, just enrichment), and one that diverges from Israeli Prime Minister Benjamin Netanyahu’s demand for complete denuclearization.

The latest diplomatic maneuvers with Iran are unfolding against the backdrop of intensifying military activity in Yemen, where evidence is mounting that the U.S. is preparing to offer more direct support to anti-Houthi forces on the ground.

The internationally recognized Presidential Leadership Council—backed by the U.S., Saudi Arabia and other Gulf allies—is assembling an estimated 80,000 troops for a major offensive aimed at retaking the Houthi-held port city of Hodeidah.

If operations against Hodeidah are launched, this would be the largest operation of the nine-year civil war and could serve as a strategic inflection point, cutting off the Houthis from the western coastline and paving the way for a future assault on Sana’a, the capital. Although the precise nature of U.S. and Gulf involvement remains unclear, signs of deepening coordination are unmistakable. American ISTAR (intelligence, surveillance, target acquisition and reconnaissance) assets have been observed operating over Houthi-controlled territory, while a recent wave of air and drone strikes—15 in the Ragwan and Madghal districts of Ma’rib, and others targeting Kamaran Island in Hodeidah Governorate—suggests that U.S. airpower is being used to prepare the battlefield. The emerging pattern points to a shift toward more direct external support for Yemeni forces attempting to reshape the conflict’s balance.

Move fast and break things

In a positive sign that Trump administration pressure to re-shore tech industry production to the U.S., semiconductor firm Nvidia announced on Monday that it plans to invest up to $500 billion over the next four years to build artificial intelligence servers in the U.S., with support from partners including Taiwan Semiconductor Manufacturing Company (TSMC). The announcement follows the U.S. government’s decision to exempt electronics and smartphones from tariffs on Chinese imports.

Microchips have become a geopolitical priority, vital to fields ranging from artificial intelligence to supercomputing and defense. During his first term, Trump imposed restrictions on the export of U.S. AI chips and chipmaking tools to China—a policy later expanded under President Joe Biden. Last year, the Biden administration banned exports to hundreds of firms linked to Huawei.

In March, Trump and TSMC Chief Executive Officer C.C. Wei announced that the company would invest $100 billion in its fabrication facility in Arizona, building on an earlier $65 billion commitment. TSMC, headquartered in Taiwan, produces the majority of the world’s semiconductors.

The 2022 Chips Act, introduced under Biden, has played a central role in incentivizing domestic production. At present, the U.S. manufactures only about 10% of the world’s semiconductors.

It’s now the U.S. vs China, everyone else needs to pick a side

NATO announced on Monday that it has acquired the AI-driven Maven Smart System from Palantir Technologies, a U.S. software company founded by Donald Trump ally Peter Thiel. Palantir has longstanding ties with the Pentagon and has secured over $2.7 billion in U.S. government contracts since 2009, including $1.3 billion with the Department of Defense. Maven Smart System integrates generative AI, machine learning, and large language models to offer military commanders a unified operational picture.

The system fuses satellite imagery with other battlefield data and uses AI to identify targets in near real time, thereby accelerating decision-making. NATO’s version will be tailored to integrate with allied platforms and data streams. While the technology is now embraced by NATO, it has not been without controversy. Initially developed with Google’s involvement in 2017, the project provoked internal protests by thousands of employees opposed to the company’s role in facilitating U.S. drone targeting.

Chinese President Xi Jinping arrived in Vietnam on Monday, where he met with Vietnamese President Lung Cuong at the start of a two-day state visit.

Xi also held talks with General Secretary To Lam, head of Vietnam’s Communist Party and his official counterpart. The two sides signed several memorandums covering cooperation in areas such as supply chain integration, rail development and environmental protection. State media in Hanoi reported that both governments agreed to accelerate an $8 billion railway project approved earlier this year.

Xi’s visit comes as the U.S. raises some tariffs on Chinese goods to as high as 145%, furthering economic decoupling between the world’s two largest economies.

Several Southeast Asian economies enjoy substantial trade surpluses with the U.S., driven by low-cost exports.

Tariffs of up to 46% have been levied on Vietnamese imports. In recent years, global supply chains have pivoted toward Vietnam to diversify away from China. Although President Donald Trump has issued a 90-day reprieve on some tariffs, the resulting uncertainty has unsettled regional governments.

Vietnam, one of the fastest-growing economies globally, is rapidly emerging as a manufacturing hub. Last week, U.S. Treasury Secretary Scott Bessent met with Deputy Prime Minister Ho Doc Pho and agreed to initiate formal trade talks.

Instability from Sahel to Horn of Africa amid state fragility, Russian interference, & Islamist insurgencies

The United Nations’ International Organization for Migration reported on Monday that approximately 400,000 people have been displaced from the Zamzam refugee camp in North Darfur, following its seizure by the Rapid Support Forces (RSF). Around 300 civilians were reportedly killed during a four-day battle for control of the camp, located near al-Fashir. The area was already suffering from famine, the result of a prolonged siege. While the RSF claims the camp was being used by hostile militias, the group has been repeatedly accused of atrocities against civilians.

Since Sudanese government forces regained control of Khartoum, the RSF has intensified operations across Darfur. Nearly 13 million people have been displaced and thousands killed since the civil war began two years ago.

In a joint statement on Monday, Egypt and Qatar expressed “grave concern” over the deteriorating situation and urged both sides to cease hostilities. Egypt remains a key backer of Sudan’s army.

Europe's center of gravity shifts east, politics moves right, & hostility to migrants from the south rises

Greece signed a new defense agreement with France on Monday that includes the purchase of 16 Exocet anti-ship missiles. Greek Defense Minister Nikos Dendias finalized the deal in Athens alongside his French counterpart Sébastien Lecornu.

The agreement is part of a broader Greek initiative to strengthen national defense amid longstanding tensions with Türkiye, particularly over the Aegean Sea and eastern Mediterranean.

Earlier this month, Athens announced plans to spend €25 billion ($27 billion) on defense through to 2036.

Dendias described the overhaul as a “full change of dogma” in Greek defense policy and said he envisions Greece becoming a “key branch” of the European Union’s security architecture.

In 2022, Greece and France signed a formal defense and security cooperation pact. Greece spends over 3% of GDP on defense, making it one of the few NATO members to exceed the alliance’s spending target (although the Trump administration is now pushing NATO members to up spending to 5%).