6 Months in: Things to Watch - 2025
ESI Team
Introduction by Managing Editor, Graysen Morency
In early 2025, ESI’s research team released Things to Watch - 2025. A forward-looking geopolitical forecast identifying the key global developments likely to shape the year ahead. Now, at the halfway mark, we revisit those projections, examining what has materialised as expected, what has shifted in surprising directions, and what new dynamics demand close attention in the second half of 2025.
The contours of the new geopolitical environment are becoming clearer. Heightened tensions between major powers, ongoing trade disruptions, and the persistence of regional conflicts are reshaping the global flow of goods, capital, and influence. These developments are no longer episodic—they are systemic—and their impacts are being felt across industries and geographies. From renewed protectionism in Washington and deepening strategic competition in the Indo-Pacific, to energy realignments in Europe and widening instability in the Middle East, 2025 has proven to be a year of accelerating complexity. While some trends have played out in line with our initial analysis, others demand a reassessment of risk models and business strategies.
The first half of 2025 has underscored the reality that geopolitical risk management is no longer a niche concern—it is a core strategic function for businesses across the globe. ESI remains committed to helping clients anticipate these risks, decode complex global developments, and turn analysis into actionable strategy. Our six-month review distills critical insights from the year to date and provides an updated outlook on what to watch in the months ahead.
Trump’s Return: America First in a Changing World
In December of 2024, ESI’s founder, Ben Goddard, predicted the impact of Donald Trump's second term on the US and the broader world. As predicted, Trump’s brinkmanship and transactional diplomacy has resumed, with sharp rhetoric toward China, NATO partners, and the BRICS-aligned ‘CRINK’ bloc. However, global conditions in 2025, marked by fragmented alliances and multiple active conflicts, have made this strategy more volatile. Existing treaty structures have remained structurally sound, NATO allies have committed to increases in defence spending, but relations between member states remain tense, reflecting greater uncertainty.
In April 2025, President Trump introduced his planned ‘Liberation Day’ tariffs—a universal 10% on most imports, with reciprocal tariffs up to 50% on selected countries. This move quickly triggered counter‑tariffs and strategic supply‑chain adjustments among key US trade partners. As anticipated, these tariffs became the centrepiece of Trump’s classic quid‑pro‑quo diplomacy, heightening tensions with both allies and rivals. Notably, tensions with China flared around critical sectors like rare earths, EV components, and clean tech supplies. US firms faced sudden cost increases and supply disruptions in these areas, worsened by China’s export‑control measures limiting rare earth shipments. While Congress continues to act as a moderating force, the broader impact of Trump's protectionist stance is being felt across inflation-sensitive industries. Rising input costs, especially for goods sourced from China, are contributing to price pressures in the US market and complicating economic forecasts for the second half of the year.
Trump’s pledge to expand oil and gas production while rolling back green energy incentives has yielded short-term economic benefits. National fuel prices have seen modest declines, pleasing key voter blocs. However, concerns remain that these policies may stall investment in renewables and undermine US credibility in global climate leadership over the long term.
Immigration policy has indeed taken centre stage. As expected, the administration has leaned into high-visibility enforcement actions to consolidate domestic support. Over 56,000 deportations have been carried out since January, and a new detention facility has opened in the Florida Everglades. These efforts—widely publicised—underscore the administration’s intent to address illegal immigration head-on. Yet, the administration’s moves to restrict legal immigration, particularly in labour-intensive sectors, are already creating strain. The construction industry, where immigrants comprise roughly one-third of the workforce, is beginning to feel the pinch, with similar trends emerging in agriculture and manufacturing.
Six months into Trump’s second term, it is evident that his administration is reviving familiar strategies. Yet the international landscape of 2025 is far more unstable and contested than before. Whether the administration will adapt its playbook to manage these heightened risks remains uncertain—but what is clear is that the costs of miscalculation, both domestically and abroad, are growing.
Towards a Ceasefire in Ukraine
Six months into 2025, the Ukraine conflict remains mired in a bitter stalemate. The frontline—particularly across Donetsk and Zaporizhzhia—has held steady since late 2024, validating earlier forecasts that no decisive offensives would emerge. This is not a static impasse, but rather a grinding war of attrition: Russia continues tactical gains around Kupiansk and Donetsk, while Ukrainian forces launch limited but costly counterattacks near Pishchane, Novooleksandrivka, and southern Zaporizhzhia. High casualties and equipment losses continue to curtail any hopes of a large-scale operation.
As initially forecast, Russia has shifted from large-scale offensives to entrenchment and strategic interdiction. Across occupied zones in Donetsk, Zaporizhzhia, Kherson, and Sumy, fortified lines—trenches, mines, anti-vehicle barriers—have been systematically reinforced. Meanwhile, Russia has escalated air and missile campaigns, executing record-breaking strikes, such as 477 drones and 60 missiles in a single night in late June, and over 900 aerial weapons in a three-day blitz in May—primarily targeting Ukraine’s energy and logistics infrastructure. These strikes, alongside railway and bridge defences, allow Moscow to preserve manpower and consolidate battlefield control while inflicting sustained damage on Ukraine’s defence capacity.
Support from NATO allies remains fundamentally intact but is showing signs of strain. Direct US military assistance to Ukraine continues and fears of a complete withdrawal have so far proven unfounded. However, political fatigue is increasingly evident in Washington and key European capitals. Debates in countries like Germany, France, and Italy have grown more focused on exploring diplomatic solutions and exit strategies, rather than extending long-term military commitments. This gradual erosion of political will, anticipated by our analysts, is influencing policy discussions, with rising calls for ceasefire talks and a negotiated settlement to establish a sustainable framework to end the conflict.
Unlocking the Arctic: Melting Frontiers and Polar Minerals
While speculative commentary around US ambitions to acquire Greenland did re-emerge with Donald Trump’s return to the political stage, these remarks have not yet materialised into formal diplomatic overtures. Instead, dialogue between Washington and Nuuk has centred on practical cooperation in defence and mining, a development more aligned with the scenario’s realistic track. The Greenlandic government has reaffirmed its stance on sovereignty while remaining open to strategic partnerships that support its economic autonomy, particularly in critical minerals.
Meanwhile, as anticipated, Arctic governance continues to lag behind accelerating commercial interest. Though the promise of vast rare earth deposits is drawing sustained attention, operational realities have kept extraction cautious. Greenland’s regulatory frameworks remain stringent, and local resistance to unchecked development has grown amid environmental concerns. The physical risks posed by melting permafrost and limited infrastructure further constrain momentum, reinforcing the gap between economic ambition and logistical feasibility. All of these factors highlight the challenges Greenland faces in developing stable and sustainable supply chains for critical minerals amid environmental, regulatory, and infrastructural constraints.
Europe's Energy Challenges: Navigating Supply Shortfalls, High Prices, and Strategic Shifts
In December of 2024, Europe experienced a natural gas shortfall due to the expiration of Gazprom's transit agreement with Ukraine. This agreement, facilitating the transport of roughly 40 billion cubic meters (bcm) of Russian gas annually through Ukraine to Europe, led to a nearly 15 billion bcm shortfall for the EU in 2025. In-line with our predictions, European gas markets responded by ramping up LNG imports—particularly from the United States, which accounted for the bulk of new global supply growth and played a critical role in stabilising European supply. Though negotiations with Azerbaijan and other pipeline exporters yielded some success, they fell short of fully replacing lost volumes. The impact was particularly visible in storage drawdowns. By March 2025, EU gas storage dipped to around 39%, down from 63% a year prior, highlighting ongoing winter resilience concerns.
Gas prices remained volatile into early 2025, though they stayed within the forecasted EUR 50–70/MWh range. A mild winter and demand-side efficiencies helped anchor prices toward the lower end of that band, offering some relief to European consumers. Still, structural fragilities persist. The expiration of the EU’s gas price cap in January added further uncertainty, and with Asian demand strengthening, European buyers now face rising global competition for flexible LNG cargoes.
Europe’s growing reliance on LNG has transformed its energy security landscape—reducing dependence on Russian pipeline flows, but also creating new strategic dependencies. North American producers, particularly in the U.S., are expected to supply nearly 90% of this year’s 27 million metric tons of new LNG capacity, underscoring their pivotal role in global energy stability. However, questions have emerged around long-term supply-demand dynamics, with U.S. domestic market balances tightening and infrastructure operating at high capacity. These challenges underscore the need for continued investment, regulatory alignment, and forward planning to maintain reliability over the medium term.
Meanwhile, calls from ten EU member states to extend sanctions to Russian pipeline gas and LNG imports have yet to gain traction. Hungary and Slovakia, are still heavily dependent on Russian gas, with Slovakia in particular facing substantial economic losses from reduced transit revenues. In this context, Europe’s ambitions for energy autonomy may be tempered in the near term, as constrained supply options and elevated prices strain the bloc’s strategic coherence and competitiveness.
Syria's Fragile Rebirth: Between Power Struggles and Foreign Influence
The collapse of Bashar al-Assad’s regime in late 2024 marked a dramatic turning point for Syria, ushering in a new era under the leadership of Hayat Tahrir al-Sham (HTS), now led by Ahmed al-Sharaa. As anticipated, diplomatic engagement with the provisional administration has proceeded cautiously. While the U.S. and other Western powers have lifted certain sanctions in response to diplomatic agreements, concerns remain over HTS’ extremist origins and ongoing human rights issues, which have limited broader foreign investment and economic recovery efforts. The fragile regime continues to seek legitimacy amid widespread skepticism.
Following the SDF’s integration into Syrian state institutions and the disbandment of the PKK, Turkish military expansion in northern Syria has slowed, reducing tensions between Ankara and Washington that had previously threatened to escalate. This development aligns with earlier forecasts, contributing to a relatively more stable security environment in the region. However, the broader security picture remains fragile as sectarian tensions intensify. Recent attacks on minority communities, including a suicide bombing at a Damascus church and attempts on Shia shrines, highlight the regime’s limited capacity to enforce coexistence. Persecution of Alawite populations in coastal areas further underscores the volatile sectarian landscape, which poses a persistent risk of reigniting civil conflict.
Russia’s military presence endures, albeit at a reduced level, with Moscow prioritising a strategic foothold through negotiated agreements with Damascus’ new government. Iran’s influence, by contrast, appears diminished given the new regime’s rhetoric and shifting alliances. Meanwhile, Israel’s increased military actions and territorial advances in southern Syria signal a long-term intention to consolidate control amid the power vacuum. Syria’s future remains uncertain, shaped by ongoing internal vulnerabilities and the evolving interests of external actors.
Turkmenistan's Authoritarian Path and Uncertain Future
Six months into 2025, Turkmenistan has seen little change in its authoritarianism, aligning closely with earlier projections. While no formal constitutional reforms have been announced, President Serdar Berdymukhamedov continues to consolidate power through tight internet censorship and digital surveillance. VPN restrictions continue, pushing dissent further underground, particularly among younger, tech-savvy populations.
Economic conditions present a mixed picture. Inflation fell sharply from 3.8% in late 2024 to 1.1% in early 2025, aided by food price deflation but declines in hydrocarbon exports over the past six months have reduced projected growth to 2.3% for 2025. Efforts to diversify the economy through agriculture and textile manufacturing continue, but are undermined by environmental constraints. Water scarcity—exacerbated by transboundary disputes with Uzbekistan and Afghanistan around shared rivers such as the Amu Darya—poses a significant threat to agricultural productivity.
International engagement remains cautious and largely symbolic. Despite ongoing rights abuses, neither the UN nor the EU has imposed meaningful pressure, prioritising regional stability and energy ties instead. Turkmenistan’s geostrategic location at the crossroads of Central Asia continues to attract interest from China and Russia. While Beijing’s Belt and Road Initiative offers infrastructure investment opportunities, governance concerns and political opacity limit deeper international involvement.
Yemen's Fragile Peace: Escalating Strikes and Proxy Conflicts
In line with projections, Israel has significantly reinforced its aerial supremacy against the Houthis, executing precise airstrikes on strategic targets such as Hodeidah and Sanaa’s main airport. In May, ‘Operation Port City’ saw approximately 20 Israeli jets delivering 50 munitions deep within Yemen, disabling key Houthi infrastructure. This demonstrates Israel’s continued reliance on long-range air power to project regional influence while avoiding a costly ground commitment.
Saudi Arabia and the UAE have restarted extensive air campaigns against Houthi targets, drawing parallels with earlier efforts such as Operation Decisive Storm. Throughout early 2025, coordinated strikes focused on Houthi command centres, missile launch sites, and energy infrastructure. Crucially, neither country has sent ground forces, instead depending on local Yemeni troops and private military contractors to maintain contested areas. This aligns with forecasted regional military strategies focused on minimizing direct foreign presence.
In late April, the UK and United States launched coordinated airstrikes against Houthi targets in Yemen, marking a notable escalation in Western involvement. While publicly framed as defensive actions to secure Red Sea shipping lanes, the strikes also signal a strategic shift—demonstrating London and Washington’s willingness to project force beyond naval containment. The joint operation targeted suspected drone and missile facilities near Sanaa, aiming to curtail the Houthis' long-range strike capabilities without committing to a broader campaign. Though limited in scope, the intervention underscores the growing internationalisation of the Yemen conflict and the geopolitical priority now placed on deterring asymmetric threats to maritime trade.
Despite shared objectives against the Houthis, cooperation within the anti-Houthi alliance remains undermined by persistent internal tensions. Rivalries between the Saudi-backed internationally recognized Yemeni government and the UAE-backed Southern Transitional Council continue to flare, particularly in Aden and Shabwa. Intermittent clashes and political discord between these factions have repeatedly disrupted operational coordination and impeded broader strategic cohesion, highlighting the fragile nature of the coalition.
Who Will Lead Europe?
In 2025, the European Union faces significant uncertainty as political instability in its core members, France and Germany, undermines their traditional leadership roles. France remains deeply divided after the contentious June 2024 elections, with Prime Minister Francis Bayrou heading a fragile minority government amid fierce left-right polarisation. President Macron’s declining popularity has weakened Paris’ influence within the EU, and fresh elections are increasingly likely, further destabilising the country’s ability to lead. Compounding this, Germany’s traffic-light coalition collapsed in late 2024, leading to snap elections that returned the CDU under Friedrich Merz. The strong performance of the right-wing, Eurosceptic AfD complicates coalition talks, threatening a shift in Berlin’s pro-EU stance and adding uncertainty to the bloc’s direction.
Meanwhile, Donald Tusk has leveraged Poland’s stable economy and pro-EU credentials to gain greater influence in Brussels, aligning closely with Western priorities on Ukraine. Italy’s Giorgia Meloni, bolstered by right-wing alliances, has positioned herself as a decisive voice on migration and security issues. Both could face internal disputes with Tusk in particular now having to work with a President from the right-wing opposition, however, they increasingly shape key EU debates, partly filling the leadership void left by France and Germany.
The months ahead may offer opportunities for a broader recalibration of leadership within the EU. While tensions over migration, Ukraine funding, and fiscal rules remain unresolved, the shifting political landscape could allow newer voices—particularly from Warsaw and Rome—to help shape consensus in areas where Berlin and Paris remain constrained. Much will depend on whether figures like Tusk and Meloni can navigate domestic pressures while engaging constructively at the European level. If they succeed, a more distributed and flexible leadership model could emerge—one better suited to managing the EU’s increasingly complex agenda.
