Energy Market Shifts

On July 28, 2025, during a joint press conference in Scotland with British Prime Minister Keir Starmer, U.S. President Donald Trump issued an unexpected ultimatum to Russia. He declared that the Kremlin had no more than 10 to 12 days (until approximately Aug. 8, 2025) to make tangible progress toward ending the war in Ukraine. Should Moscow fail to comply, Trump warned that President Vladimir Putin would face a sweeping package of economic sanctions and severe trade restrictions. This escalation came on the heels of prolonged diplomatic stagnation and Trump’s increasingly vocal frustration with Russia’s continued military operations.   Subsequently, on July 31, 2025, former Russian President and current Deputy Chairman of the Russian Security Council Dmitry Medvedev responded with a pointed and ominous message via his Telegram channel. In his remarks, he invoked the “Dead Hand”—Russia’s semi-automated nuclear retaliation system designed to launch a retaliatory strike even in the event of a complete decapitation of the nation’s leadership.   In response, President Trump ordered the deployment of two U.S. nuclear submarines to strategic positions, framing the move as a necessary precaution in the face of what he described as “extraordinarily dangerous” nuclear threats. Notably, he refrained from specifying whether the submarines were nuclear-powered only or also nuclear-armed—introducing deliberate strategic ambiguity and reinforcing the doctrine of pre-emptive deterrence through calibrated uncertainty.   What renders this sequence of events particularly significant is that the confrontation did not remain confined to the U.S. and Russia. Its repercussions quickly extended to India, which was thrust into the geopolitical crossfire. On July 31, the Trump administration announced the imposition of a 25% tariff on all Indian exports to the United States, accompanied by threats of further penalties targeting Indian firms that continue to purchase Russian crude oil or engage in defence cooperation with Moscow. The rationale behind this punitive action lies in New Delhi’s deepening energy relationship with Russia.   Although the Indian government has not officially announced any suspension of contracts with Russian suppliers, discreet directives were reportedly issued to state-owned refiners instructing them to explore alternative sources in the global spot market. This pivot has begun to materialize reflecting New Delhi’s attempt to maintain equilibrium between preserving its strategic autonomy and mitigating mounting U.S. pressure.   Yet the broader implications of this crisis extend well beyond geopolitical brinkmanship. What is unfolding is a systemic shock to the global order—one that is reverberating through energy markets, food security systems, arms trade corridors, and supply chains. The consequences will not be distributed evenly: while some Middle Eastern states stand to benefit from surging demand and price shifts, others may face acute vulnerabilities due to trade disruptions, inflationary pressures, or capital flight.

The relationship between the United States and the European Union serves as a model for economic integration and collaboration in trade and investment between two non-regional parties. Both sides are considered each other's significant general trading partners when it comes to commercial relations for goods and services. Conversely, China surpassed the United States as Europe's top trading partner for goods in 2020. In 2022, trade in goods between the two sides exceeded $900 billion, while trade in services exceeded $500 billion.   Despite its strength, this relationship has its share of trade disputes, primarily fuelled by the growth of bilateral trade and each side's desire to further enhance its surpluses by entering the other's market. These disputes sometimes even reached the World Trade Organisation (WTO), most recently in 2018 when the US imposed 25% and 10% tariffs on imports of steel and aluminium from the EU based on national security grounds, to which the EU replied in kind.   However, the nearly 17-year-old dispute for control of the world's civil aviation industry between the two giant companies, American Boeing and European Airbus, was the most intense ever. Each side, "the United States and the European Union," made an effort to provide government aid to its company against the other. As the dispute escalated, both sides imposed retaliatory tariffs on a portion of each other's imports, which by 2021 totalled $11.5 billion. Eventually, in light of their disagreement with China, the two sides agreed to a trade truce, which stopped the dispute.   With every dispute between the two sides, the world hangs its breath due to their significant impact on the international economy, the shift forced by such a conflict in supply chains and the potential global slowdown. The world has been concerned about a similar situation since US President Joe Biden successfully passed his Inflation Reduction Act of 2022 in August 2022, which heralded the beginning of a prolonged war on both sides of the Atlantic in a world already dominated by trade and military conflicts between the East and the West.   This article analyses the American Inflation Reduction Act and predicts how this Act will impact the global economy in light of the current unstable economic situation.