Iran Status Update
The US-Iran conflict is now seeing the risk of escalation extending beyond direct exchanges between Washington and Tehran. While both sides appear to be calibrating their own strikes to avoid a return to full-scale conflict, peripheral actors—including the Houthis and Iran-aligned groups in Iraq—are expanding the geographic scope of the conflict. Regional governments face growing pressure to respond to attacks on their infrastructure and maritime routes. The strike against Egypt’s Damietta port highlights the vulnerability of energy infrastructure outside the conflict’s traditional theater and raises the prospect that additional states could be pulled into the confrontation.
Emerging World (Dis)Order
Brazil’s presidential race assumed greater geopolitical significance this week as foreign leaders became increasingly drawn into the campaign. Senator Flávio Bolsonaro’s formal candidacy was endorsed by Argentinian President Javier Milei, while President Xi Jinping reaffirmed China’s support for President Luiz Inácio Lula da Silva in the face of “external interference”— a reference to President Trump’s imposition of new tariffs on Brazilian goods, officially justified on trade grounds but widely viewed as also intended to increase political pressure on Lula while benefiting Bolsonaro’s campaign.
The competing camps are now seeking to frame the election through foreign policy. Bolsonaro has embraced support from ideological allies abroad, while Lula has cast external pressure as an attack on Brazilian sovereignty. Thus far, polling suggests voters in key electoral regions are increasingly associating the economic costs of US tariffs with Bolsonaro’s international relationships rather than Lula’s government, potentially benefitting the incumbent.
The campaign also carries significant implications for Brazil’s economic direction. Lula has accelerated engagement with China while strengthening Mercosur’s commercial ties with Beijing, reinforcing expectations of deeper economic integration if re-elected. By contrast, a Bolsonaro victory would likely reorient Brasília toward Washington, although recent trade disputes have highlighted the risks of relying too heavily on political alignment to secure economic outcomes.
Beyond the immediate election, this week’s developments suggest Brazil is becoming another arena in the broader strategic competition between the United States and China. The outcome will shape not only the country’s domestic leadership, but also whether Latin America’s largest economy moves closer to Beijing or seeks to rebuild relations with Washington.
Weekly Wildcard
The United States this week took two notable steps to strengthen its heavy rare earth supply chain, with the US Development Finance Corporation backing a heavy rare earths project in Madagascar while US-based critical minerals company REalloys advanced plans to build a dysprosium and terbium processing facility at the Tooele Army Depot in Utah—the first commercial critical mineral processing project on a US military installation. These moves are the latest indication that Washington is treating heavy rare earths as a strategic national security priority, reflecting growing concern over China’s near monopoly in processing these critical minerals.
Dysprosium and terbium are essential components in advanced magnets used in defense systems, electric vehicles, and renewable energy technologies, yet China controls roughly 99% of all global processing capacity. Until now, no private US buyer has been willing to commit to purchasing these materials at prices that would allow Western processors to compete with lower-cost Chinese suppliers. By backing processing projects with government financing and military infrastructure, Washington is signaling that access to critical minerals is becoming a national security priority rather than one left to market forces.
A guaranteed source of demand for defense-grade materials could encourage processors in US-allied countries to expand capacity, gradually reducing dependence on Chinese refining. At the same time, Chinese export restrictions have demonstrated the strategic leverage Beijing derives from its dominance, making diversification a priority for governments across North America, Europe, and Asia.
Rather than attempting to outcompete China on commercial terms, Washington is increasingly prepared to absorb costs that private industry has been unwilling to bear. If sustained, that approach could gradually weaken Beijing’s ability to use its dominance in heavy rare earth processing as a geopolitical lever— but that will require a long-term commitment that extends beyond individual administrations and remains insulated from shifts in domestic politics.
