Extra infoGeopolitical Gold Risk: EU Alarmed Over U.S. Custodianship
Rising geopolitical volatility and former President Trump’s escalating rhetoric against the U.S. Federal Reserve have sparked renewed European concerns over national gold reserves stored in the U.S., especially in Germany and Italy. Both nations hold the second and third-largest gold reserves globally (3,352 and 2,452 tonnes respectively), with a significant portion—over $245 billion in total—custodied at the New York Fed.
Lawmakers and public advocacy groups across the political spectrum in both countries are urging repatriation of gold to domestic vaults, citing Trump’s erratic policy stances and potential interference with central bank independence. The Bundesbank continues to defend New York's strategic value, while Italy remains silent. A growing number of central banks globally are reportedly shifting or planning to shift gold home as a precautionary move.
Japan’s Political Shifts: LDP Faces Voter Blowback Over Inflation
Japan’s ruling Liberal Democratic Party (LDP) suffered a historic electoral defeat in Tokyo’s local assembly elections, signaling growing voter discontent over surging food prices and stagnant wages. The LDP lost 8 of its 30 seats, surrendering its top position to Governor Yuriko Koike’s regional party, Tomin First.
With upper house elections on July 20, this loss raises risks of further political fragmentation. The populist right-wing Sanseito party gained seats for the first time, showcasing a shift toward fringe movements. PM Ishiba’s government also faces diplomatic and economic pressure as Trump threatens tariffs on Japanese imports. Tokyo’s results act as a warning sign that inflation and trade anxieties are materially influencing voter behavior.
U.S.-Korea Defence Diplomacy: Rolls-Royce Eyes GE Replacement
As South Korea reassesses its KF-21 fighter jet engine partner, UK officials are lobbying aggressively for Rolls-Royce to replace GE Aerospace, citing U.S. export restrictions that limit Seoul’s ability to sell jets internationally. The KF-21’s export prospects to Indonesia and the UAE are reportedly at risk due to American national security clauses.
Rolls-Royce proposes a joint development model to de-risk the engine program. However, entrenched U.S.–Korea defense ties, including Hanwha’s integration with U.S. military platforms, complicate this pivot. The U.K. seeks not only defense industrial collaboration but strategic geopolitical alignment with Seoul as a hedge against U.S. protectionism.
Energy Sector on Edge: Majors Withdraw Staff Amid Escalation Risks
European energy giants BP, TotalEnergies, and Eni have begun evacuating foreign staff from Iraqi fields, citing risk of Iranian retaliation after U.S. strikes on Tehran’s nuclear facilities. Operations remain intact, but local authorities confirm precautionary withdrawals, with Total reportedly pulling 60% of its expats.
Rumaila, Zubair, and southern Iraqi fields are proximate to Iranian territory and vulnerable to missile or proxy militia attacks. Analysts caution that Iran could exploit asymmetric tactics via regional militias, threatening key infrastructure without directly engaging U.S. forces. Shell, also present via Basra Gas, declined comment. The withdrawal underscores the fragile security balance as military posturing continues to escalate.
Oil Markets Volatile: Trump Demands Surge in U.S. Production
Following Brent crude’s spike to $81.40 and a subsequent intraday fall to $76.90, President Trump urged the Department of Energy to “DRILL, BABY, DRILL!!!” to stabilize prices. His public messaging emphasizes a fear that elevated oil costs play into enemy strategies, pressuring energy firms and OPEC+ to expand output.
So far, Middle East supply has not been disrupted, and no damage to the Strait of Hormuz—which handles 21 million barrels/day—has been recorded. However, analysts from S&P, SEB, and RBC warn of continued upside risk if Iran or its proxies target tankers, refineries, or pipelines. Several tankers have already changed course or anchored to avoid chokepoints, signaling preemptive market caution.
Financial Markets and Central Bank Tensions
Trump’s repeated interventions into Fed policy, combined with tariff-driven inflation concerns, have created a highly politicized environment for monetary policy. He has publicly demanded immediate rate cuts to 1–2%, pressuring Powell amid signs of internal division among Fed governors.
With inflation nearing the Fed's 2% target but geopolitical risks rising, Powell must testify to Congress this week and defend the institution's independence. A shift in Fed leadership post-2026 under a Trump administration may fundamentally reshape U.S. monetary credibility if dovish, politically loyal appointees take over.
European Fixed Income Competition: Vanguard Cuts Fees
As competition heats up in Europe’s bond ETF market, Vanguard has slashed fees on 7 of its 15 European fixed income ETFs. The changes reduce average expense ratios to 0.11%, part of a broader push to gain share from leaders like BlackRock and State Street.
This move aligns with Vanguard’s U.S. fee overhaul earlier this year, aimed at democratizing access to fixed income. European investors increasingly demand lower-cost bond solutions as the bond market now exceeds equities in size, yet remains more opaque and less efficient. The fee cut should help catalyze inflows from cost-sensit
