The world isn’t just changing—it’s fracturing. 2026 looks set to test every fragile arrangement holding the international system together. Electoral pressures, security crises, and economic uncertainties aren’t happening in isolation—they’re feeding off each other.
Elections Drive Strategic Calculations
The US midterm elections in November will shape behavior across continents. Russia sees the clock ticking—a potentially hostile Congress after midterms might close Moscow’s window for a favorable Ukraine settlement. China and the US will likely preserve their fragile trade deal to avoid economic volatility before voters head to the polls. Israel’s government will maintain military pressure on Hamas, Hezbollah, and Iran while avoiding escalations that could antagonize Washington during an election year.
Latin America shifts right. Colombia votes in May, Peru in April, Brazil in October—countries from Colombia to Peru are likely to join Chile, Bolivia, and Argentina in electing right-wing governments, leaving Brazil as the region’s main left-wing outlier.
Bangladesh votes in February, Nepal in March. Both seek constitutional normalcy after turbulent 2025s. Hungary’s April election could end 15 years of euroskeptic rule with a pro-EU opposition victory—or not.
Trade Wars and Supply Chain Risks
The Supreme Court appears ready to strike down Trump administration tariffs imposed under emergency powers, including fentanyl and reciprocal tariffs. The White House will scramble to replace them, forcing choices about which countries to prioritize—likely EU members, Canada, and Mexico. The uncertainty will hammer investor confidence in US manufacturing.
The US-China trade truce from October 2025 pauses certain export controls until mid-November. But both sides have strategic interests in restricting each other—especially as AI technologies mature. A breakdown would mean China restricting rare earth exports, hitting automotive and aerospace production hardest. Even if the deal holds, Chinese approvals for rare earth exports will remain painfully slow.
Memory chip supplies pose persistent challenges. The surge in demand for high-performance chips for AI applications could trigger another semiconductor shortage reminiscent of the post-COVID crisis that disrupted the automotive sector.
The AI Bubble Question
Investment in AI will continue surging in 2026. A burst remains unlikely—but the risk is rising. Growing backlash over environmental impacts and job displacement, combined with intensifying US-China competition, elevates concerns. If a bubble pops, it would cascade through the AI sector first—many companies going under. Data center and semiconductor suppliers would get hit next.
The AI boom isn’t driven by credit and leverage—it’s funded by cash-rich tech giants like Alphabet. Different dynamics than 2008. But backlash will grow regardless. AI will remain a flashpoint in virtually every Western labor negotiation, particularly for white-collar jobs.
Here’s the kicker: China will effectively close the AI gap in 2026. Many Chinese models—especially open-weight ones—will perform close to US frontier models, elevating Western concerns as companies increasingly choose cheap, customizable Chinese models.
Space Competition and Venezuela’s Crisis
The US expects to launch Artemis II no later than April, sending astronauts around the moon in the first manned mission there in over 50 years. China’s Chang’e 7 launches in August. Europe will try enhancing space capabilities and reducing US reliance—the European Space Agency’s transition from pure exploration to formal defense roles begins this year.
Following the US capture of former Venezuelan President Nicolas Maduro on January 3, US military operations on Venezuelan territory will continue—primarily through airstrikes targeting drug trafficking networks. Washington seeks to degrade hard-line regime remnants while avoiding a ground invasion’s high costs. The leadership vacuum will fuel prolonged political instability and elite infighting throughout 2026.
Ukraine’s Uncertain Path
Russia and Ukraine will resist major concessions early in the year. But accumulating pressures—military, economic, political—combined with US electoral timelines will increase settlement likelihood as 2026 progresses. The Trump administration will maintain diplomatic pressure on Moscow and Kyiv for a settlement, using oscillating pressure tactics.
Moscow will intensify offensives to consolidate Donbas control and expand into Zaporizhzhia. Facing mounting casualty rates and political sensitivities ahead of September State Duma elections, Moscow won’t call for large-scale conscription. Despite manpower advantages, Russian forces are unlikely to achieve decisive breakthroughs due to Ukraine’s dense drone surveillance and entrenched defenses.
If the Kremlin calculates that securing a settlement before a hostile post-midterm US Congress represents the optimal window, Russia will prioritize reaching a deal. Any settlement will likely contain significant Ukrainian territorial losses and weak security guarantees—creating lingering uncertainty over future Russian aggression.
Israel’s Strategy and Europe’s Response
Israeli Prime Minister Benjamin Netanyahu will seek a major military victory to secure another term. This strategy maintains military pressure on Hamas, Hezbollah, and Iran—mostly involving limited air power and, in Gaza’s case, ground raids and aid restrictions. Israel may launch short, major campaigns to degrade rivals’ capabilities—risking reopening war with Iran and Hezbollah. These escalations would restart Houthi Red Sea attacks and risk Iranian action against pro-US Arab states.
The European Union will intensify efforts to reduce Russian energy and Chinese critical mineral dependence while preparing to support Ukraine unilaterally if the US withdraws. The EU will proceed toward ratifying its tariff framework agreement with the US, but proposed amendments and renewed US tariff threats could threaten to unravel the deal. The Carbon Border Adjustment Mechanism will enter its operational phase, introducing levies on embedded emissions in key industrial imports.
Political instability in France and Germany will raise government crisis and early election risks. France faces another year of political paralysis with significant early parliamentary election risk. In Germany, the ruling coalition will come under increasing strain—a few defections potentially forcing diluted compromises on welfare, pension, and economic reforms.
Regional Flashpoints
Al Qaeda-linked jihadists’ targeting of Mali’s economic infrastructure will increase pressure on the country’s junta to shift counterterrorism strategy. Jamaat Nusrat al-Islam wal-Muslimin will likely continue interdicting fuel supplies to Bamako while strengthening ties to civilian opposition groups. This raises coup risk—new authorities could strike an agreement with JNIM whereby the jihadist group gains some government influence.
Worsening tensions between Ethiopia and Eritrea increase the likelihood of intensifying proxy clashes. Addis Ababa’s push for direct sea access and Eritrea’s ties to anti-government groups inside Ethiopia will keep bilateral tensions high.
India’s slow-moving trade talks with the US won’t eliminate further tariff risks. Ongoing court proceedings could slow progress, especially if the Supreme Court finds Trump administration reciprocal tariffs unlawful. Threatened tariffs on pharmaceutical products would hit India hard—the sector relies heavily on the US market.
The Afghan Taliban will remain unwilling and probably incapable of constraining Afghanistan-based anti-Pakistan militants to Islamabad’s satisfaction. Neither Kabul nor Islamabad desires prolonged conflict, but barring meaningful compromises, cross-border clashes will very likely continue.
Economic Divergence
Global economic growth will remain broadly stable, but regional outlooks will diverge sharply. The US economy faces elevated uncertainty due to labor market and inflation risks, heavy reliance on AI-driven investment, and lingering tariff questions. The euro area’s outlook will improve modestly, supported by higher German spending—though fiscal strains in France pose downside risks. China’s growth will slow, prompting stronger policy support if domestic demand weakens further.
Large government deficits in most advanced and several emerging economies will continue translating into further debt ratio increases. Government debt ratios currently exceed 100% of GDP in five of seven G7 countries. France will face the most challenging financial outlook given its outsize fiscal deficit and lack of political consensus on fiscal consolidation.
Absent a sharp economic downturn, monetary easing will largely pause in 2026—the Federal Reserve will slow rate cuts and the European Central Bank will hold rates steady.
The Bottom Line
Look, 2026 won’t be a year of resolution. It’s a year of tests. The fragile US-China trade truce. Ukraine’s grinding war. Israel’s calculated escalations. Europe’s push for strategic autonomy. These aren’t separate stories—they’re interconnected pressures testing every assumption about how the international system works.
Electoral calendars will drive strategic decisions from Washington to Moscow to Jerusalem. Supply chain vulnerabilities will persist despite attempts at diversification. Economic growth will hold—but financial vulnerabilities will mount as debt ratios climb.
The central question? Whether accumulating pressures lead to managed transitions or cascading crises. The answer will shape not just 2026, but the years that follow.
