Geostrategic Signals: Half-time - What Will Define H2 2026? (Rothschild & Co)

Summary

• The second half of 2026 looks set to be defined by continuing geopolitical shifts across multiple arenas rather than any single crisis.p.2
• Under the June 2026 US–Iran MoU, the US would remove its naval blockade within 30 days and develop a plan for US$300bn of reconstruction and economic development of Iran.p.4
• Iran would ensure safe passage of commercial vessels with no charge for 60 days under the MoU.p.4
• The 7-9 July exchange of strikes shows both sides are willing to use coercion to protect their leverage.p.4
• Europe's trade deficit with China is running at close to €1bn a day, pushing EU policy towards a more defensive stance.p.5
• Two German regional elections in September and the French presidential race in 2027 could lead to more nation-first governments.p.5

Key insights

1. A steady erosion of trust between traditional partners is pushing countries to hedge, diversify and act in their own self-interest.p.2
2. Even if the House and Senate flip, the practical consequences are smaller than the headlines imply because much of the Administration's agenda was achieved through executive authority.p.3
3. At the Federal Reserve, Chair Warsh is expected to guard the institution's independence, with no dramatic change of course.p.3
4. The US–Iran MoU is extremely fragile, but both sides still need it, and Hormuz has become the main arena for renewed confrontation.p.4
5. Europe is still exporting its savings but cannot get the capital to work productively at home, and momentum behind deeper integration is fading.p.5
6. Fiscal concerns could play out in the bond markets if a more nation-focused policy approach takes hold in the EU.p.5
7. Europe needs to mobilise significant private capital for energy independence, defence and industrial transformation, while the concepts of trusted capital and European champions gain prominence.p.6
8. Expanded investment screening and foreign subsidy tools mean more friction in M&A is expected.p.6