Risk Outlook: June 3, 2026

Jun 03, 2026

Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market.

Global

The US signals openness to maintain the nuclear umbrella to Europe. According to the Financial Times, Washington is in discussions to deploy nuclear-capable bombers to additional NATO member countries. Poland and some Baltic states are interested in hosting US dual-capable aircraft and nuclear weapons. Currently, only Belgium, Germany, Italy, the Netherlands, Turkey and the UK are approved to host US DCA and forward-deployed nuclear weapons.

These talks take place against the backdrop of growing European doubt about US commitments. President Trump’s criticism of the value of NATO, designs against Greenland’s territory, Pentagon orders to scale back troop deployments and lack of coordination on talks with the Kremlin on the terms for ending the war in Ukraine have led many European leaders to assess that European security and the transatlantic relationship are not priorities for the Trump administration.

Without the US nuclear umbrella, Europe faces a strategic vulnerability from Russian nuclear threats. US pressure and the changing context of the European security environment have compelled NATO member states to invest in their defense infrastructure and military capabilities in order to assume the primary responsibility for European defense. Under the Northwood Declaration, France and the UK are deepening their framework for nuclear coordination within the NATO alliance framework. However, it cannot replace US extended deterrence.

Europe

Hungarian Prime Minister Peter Magyar concludes an EU tour today with a visit to Paris, clarifying his firm stance on Ukraine. Magyar met with German Chancellor Friedrich Merz on Tuesday, emphasizing a “fresh start in relations” with the EU’s traditional power brokers. Magyar emphasized that Hungary will not send weapons to Ukraine but signaled openness to dropping its veto on the European Peace Facility, which could unblock €40 billion in reimbursements to EU member states that transferred weapons stocks to Kyiv. Magyar suggested that Hungary will lift its veto on opening Ukraine’s EU accession negotiations once language and educational rights for Ukraine’s Hungarian minority ethnics are protected. Technical talks between Hungary and Ukraine are ongoing, but Magyar expressed optimism that they could conclude this next week and open the door with a direct meeting with Ukrainian President Volodymyr Zelenskyy.

Magyar’s visit to Berlin and Paris, his second state tour, follows a Friday meeting with Ursula von der Leyen that unblocked €16.4 billion in EU funds to Hungary. Those funds include €10 billion in post-COVID recovery funds and €6.4 billion in the EU’s cohesion funds. Unlocking this cash was a key part of Magyar’s campaign. While not a silver bullet, the influx of EU money will help Hungary replenish public services and narrow its projected budget deficit, which could reach 6.2% by the end of 2026. Magyar’s embrace of the EU means that Hungary’s role as spoiler appears to be over, even as Magyar continues to advocate for Hungary’s national interests and coordinate a “moderate” stance on Ukraine with other Central European countries.

Read More: Euractiv, Politico, Reuters [paywall], Stepwise Risk Outlook

Middle East

Israel and Lebanon agreed to a partial ceasefire. On Monday, Lebanon announced a partial ceasefire between Hizballah and Israel that would see Israel refraining from strikes on Beirut and its suburbs, and Hizballah would halt strikes on Israel. The deal is a limited de-escalation from the peak in tensions of recent days, in which Israel accelerated bombings in Beirut and took new territory in southern Lebanon. Under the agreement, Jerusalem would retain the right to operate in southern Lebanon and conduct operations in self-defense.

The concession apparently came at US urging in a bid to get the US-Iran deal across the finish line. Iran reportedly told the US that a cessation of fighting in Lebanon was a prerequisite for agreement on a broader ceasefire agreement, which has been preliminarily agreed but is dragging into its second week of study. Notably, the negotiation was the first time a US president had ever publicly spoken with Hizballah, even with intermediaries. Misalignment on the conflict in Lebanon stems from the original US-Iran ceasefire deal, which Iran said included Lebanon and the US says did not.

The deal may be the latest in a series of halfway ceasefires in the Middle East, wherein fighting is dampened but far from ended or solved. In Gaza between Israel and Hamas, southern Syria between Israel and Damascus, and the Arab Gulf between Iran and the US, “ceasefire” has come to mean something less than a complete pause in fighting. Indeed, Israel reported new projectiles from Lebanon on Tuesday morning. While imperfect, the deals dampen conflict and reset the escalation ladder, providing a reprieve for the region’s peoples and militaries, as well as the global economy. The proliferation of these weak ceasefires points to the intractability of the underlying issues, though, and the difficulty of reaching a more comprehensive deal.

Read More: Reuters [paywall], Axios, Wall Street Journal [paywall], Washington Institute for Near East Peace

Asia-Pacific

Myanmar President Min Aung Hlaing is in India to hold talks with Prime Minister Narendra Modi. This five-day visit is his first trip abroad since being sworn in as Myanmar’s president in April, in elections that have drawn international scrutiny. Aung Hlaing is the former leader of the country’s armed forces, which deposed the elected government of Aung San Suu Kyi in 2021, leading to an ongoing civil war. In this year’s elections, Aung San Suu Kyi’s party was barred from participating, and Aung Hlaing emerged as head of the military-backed government. Since the 2021 coup, many Western nations have imposed sanctions and sought to isolate the country’s rulers. New Delhi has taken the stance that engagement is the best way forward.

The talks between the two leaders have addressed Myanmar’s political situation, according to India’s Foreign Secretary Vikram Misri. Misri raised the issue of democracy and the status of Aung San Suu Kyi, who remains under house arrest. Security cooperation was also on the agenda, with Aung Hlaing assuring that Myanmar’s territory would not be used against Indian security interests, and Modi affirming Myanmar’s territorial sovereignty. Aung Hlaing also travelled to Mumbai to meet with business leaders and discuss opportunities for expanding bilateral trade and investment.

The visit provides Myanmar’s government with a valuable diplomatic opportunity after years of international isolation. For India, the visit reflects a prioritization of strategic regional interests, including stability along the north-eastern border, the success of the Act East policy, and managing regional competition with China. Myanmar is the only ASEAN member state that shares a land border with India. The conflict in Myanmar has had consequences for India, with thousands of refugees from Myanmar’s ethnic minority groups spilling over the Indian border. India is also concerned with insurgent groups near the border, as well as the smuggling of drugs and arms, and human trafficking. New Delhi also has an interest in Myanmar’s deposits of rare earth minerals, although China has more influence over the region’s critical mineral supply chains.

Read More: BBC, NPR, AP

Americas

Canada has formally requested a renewal of the US-Mexico-Canada Agreement (USMCA), ahead of the July 1 deadline to renew the trade deal. Mexico has also called for a renewal of the agreement and engaged in bilateral talks with the US, while negotiations with Canada have fallen behind until now. Canada-US trade minister Dominic LeBlanc is in Washington, DC, to meet with US trade representative Jamieson Greer, who concluded the most recent bilateral talks with Mexico this week. LeBlanc stated in his notice letter that the agreement gives North American countries a competitive advantage and is highly beneficial to all three countries. Nonetheless, he identified areas where the pact could be improved and called for parallel discussions with the US on sectoral tariffs.

Recent trade tensions between the US and Canada have cast doubt on the USMCA renewal process. The agreement has been in effect since July 1, 2020, with a mandatory joint review deadline on July 1, 2026, to extend the agreement for another 16 years. If the three parties fail to agree to an extension, the agreement will enter a cycle of annual joint reviews. The US has cited several grievances with Canada, including the decision by most Canadian provinces to remove American-made alcohol from shelves in response to US tariffs. The US also wants greater access to Canadian markets, like the dairy market, where Canada’s strict production quotas and import controls protect local producers.

In talks with Mexico, US negotiators are expected to propose a change to the agreement that would require half of automobile components to come from the US to qualify for low tariffs under the deal. This would be a significant increase in the US content requirement for cars produced under the USMCA. Under the current terms, three-quarters of an automobile’s materials must be sourced from North America. This requirement is also expected to be one in which the US negotiators will propose an increase. Under the current terms, there is no US-specific content requirement. While the 50% US content requirement would be welcomed by US labor unions, it will likely be met with skepticism from many North American auto producers.

Read More: BBC, Wall Street Journal [paywall], Reuters

Africa

The Department of State submitted a report to Congress outlining US relations with Somaliland, a self-governing territory that declared independence from Somalia in 1991. The report identifies three areas to deepen engagement: security cooperation, diplomacy, and trade and investment. While the report describes the future trajectory of US-Somaliland relations in vague terms, it explicitly recognizes the territorial integrity of Somalia, signaling that formal recognition of Somaliland is not under consideration. Mogadishu has actively sought to prevent recognition by offering expanded economic and security cooperation with Washington as an alternative to Somaliland’s proposed critical minerals and counterterrorism partnerships.

The US is attempting to balance growing engagement with Somaliland against the need to preserve security cooperation with Mogadishu. The report comes amid a potential Islamic State resurgence in Somalia’s Puntland state and increasing cooperation between Al-Shabaab and the Houthis in Yemen. AFRICOM’s 2026 posture statement identifies Islamic State and al-Qaeda affiliates as a key challenge on the continent, making the counterterrorism partnership with Somalia vital to US strategic objectives.

Geoeconomics

Gold has overtaken US Treasuries as the world’s top central-bank reserve asset. According to the ECB, bullion accounted for 27% of global central-bank reserve assets at the end of 2025, up from 20% a year earlier, while US Treasuries fell to 22% from 25%. The move reflects years of central-bank buying and a historic price rally that nearly doubled gold prices over two years, but it also reflects a geopolitical shift: since the US froze Russia’s dollar reserves in 2022, more governments have looked for reserve assets that sit outside Washington’s sanctions reach.

Reserve managers are hedging against dollar weaponization. Dollar-denominated assets still make up the largest overall share of reserves at 42%, and the euro’s share was unchanged at 15%, but central banks now hold more than 36,000 tons of gold, close to Bretton Woods-era levels. The biggest official buyers since 2022 have been China, Poland, Turkey, and India, while central-bank gold purchases still reached 850 tons in 2025, even after three straight years above 1,000 tons.

Read More: Financial Times [paywall], World Gold Council

Disruptive Technology

The White House signed an executive order establishing an “AI cybersecurity clearinghouse” and a voluntary framework for AI developers to share frontier models 30 days before release. The purpose of the interdepartmental clearinghouse will be to deconflict scans for cyber vulnerabilities and coordinate patches across the US government to prevent frontier models from exploiting such vulnerabilities. Within 60 days, the government will develop a “classified benchmarking process” to determine “covered frontier models.” It is up to AI developers to give the US government access to their covered frontier models to coordinate cybersecurity defenses; the order emphasizes that participation is voluntary and not a permitting obligation for new models.

The signed order is reportedly a slimmed version of a May 21 draft. The White House’s AI approach remains chiefly concerned with global competitiveness. The delay of the original order—which was reportedly perceived as a slippery slope to mandatory regulation—suggests that AI safety remains a subordinate dimension of the White House’s preferred AI policy. The multistakeholder approach may give AI developers more leverage in their engagement with the federal government, at least until AI rules are expanded.

Read More: The White House, Axios, Wall Street Journal [paywall]

Energy

The Trump administration is extending its push for more energy development projects into the Arctic. The Interior Ministry is set to unseal the bids in an auction for drilling rights in Alaska’s Arctic National Wildlife Refuge (ANWR), which could hold significant oil deposits. In the past, industry interest in the ANRW has been limited, but a March lease auction for the National Petroleum Reserve-Alaska (NPR-A) saw high bids from independent producers and oil majors. The war in Iran has also created incentives for diversifying production away from the Middle East, which could boost industry interest. However, there are still complications for selling leases in the ANRW, including pressure from environmental groups and the fact that the NPR-A is more of a known quantity.

President Trump has long shown interest in the Arctic and expanding US activities. US President Donald Trump has repeatedly expressed the desire to increase American presence in Greenland, including potentially acquiring the island. One reason for Trump’s focus on Greenland is its reserves of rare-earth minerals, and Trump has also cited national security reasons such as his “Golden Dome” missile defense project and countering Russia and China. Greenland is also home to significant reserves of oil and natural gas.

The United States is not the only country focused on the Arctic. Norway has urged Brussels to drop its opposition to new oil and gas drilling in the Arctic, and the EU Commission has been reviewing its Arctic policy “in light of the new geopolitical and geoeconomic context.” Moscow, which possesses over 50% of the Arctic Ocean coastline, also remains focused on the Arctic as an economic and energy development opportunity and as an area for military activities. China has also demonstrated an interest in the Arctic.

Read More: Axios, CNN, Reuters [paywall], Reuters [paywall], Deutsche Welle, New York Times [paywall], Atlantic Council

Transnational Crime and Corruption

UK anti-corruption and justice officials are touring offshore crown dependencies to signal an aggressive push for transparency and anti-money laundering (AML) reforms. Margaret Hodge, appointed as the Prime Minister’s Anti-Corruption Champion in December 2024, and a junior justice minister responsible for the UK’s offshore territories, traveled to Guernsey on Monday to urge the semi-independent government to implement EU-style corporate transparency reforms. Hodge publicized the visit as a new campaign to threaten UK overseas territories, such as the British Virgin Islands (BVI), Cayman Islands, and Jersey, with punitive legislation if they did not speed up and strengthen reforms.

UK overseas territories have implemented some reforms in response to years of criticism from civil society and the UK government. Jersey, Guernsey, and the Isle of Man operate beneficial ownership registries restricted to anti-corruption, AML, and due diligence officials. The UK government has pushed for the registries to be opened to “legitimate interest” or full public access. The Cayman Islands, BVI, and Turks and Caicos have implemented legitimate interest registries and Gibraltar, Montserrat and St Helena, Ascension, and Tristan da Cunha have public access registries. Hodge has criticized several of these jurisdictions for failing to properly administer these registries.

Anti-Corruption Champion Hodge is preparing a comprehensive review of asset ownership in the UK, focusing on crown dependencies and overseas territories. The Hodge report is expected this autumn and will assess the national security threat posed by transparency issues in UK offshore territories. A January report by Tax Policy Associates found that over 3,000 properties in England and Wales were owned by Jersey entities that illegally failed to report true beneficial owners. Thousands more properties worth hundreds of millions of pounds were improperly registered as “owned” by opaque trusts set up in the Isle of Man, the Cayman Islands, and the BVI.

Read More: Financial Times [paywall], States of Guernsey, Tax Policy Associates