Possible postwar Ukraine security guarantees ready, chikungunya outbreak grows in China, weak jobs numbers suggest Fed rate cut likely || Global Risks Weekly Roundup #36/2025

Executive Summary

• Economy: Weak August US jobs numbers make a September Fed rate cut look more likely. Bond markets are showing signs of stress, and gold prices continue to rise, reflecting growing risks.

• Geopolitics: French President Macron said 26 nations are ready to provide postwar security guarantees to Ukraine. China hosted foreign leaders for talks on economic cooperation and held a large military parade.

• Biorisk: A large chikungunya outbreak continues to grow in China.

• Artificial Intelligence: OpenAI faces significant criticism from the attorneys general of California and Delaware over the recent cases of ChatGPT-associated suicide and murder-suicide.

Forecasts

Will US unemployment be at 5.0% or above in the month of February 2026?

Forecasters estimated a 24% chance (range, 10% to 45%) that unemployment would rise to this level. An increase from current levels of 4.3% to 5.0% over the next 6 months would be quite significant. In discussion, forecasters brought up issues such as AI-induced unemployment (or, conversely, an AI-investment bubble popping), in addition to traditional economic challenges, including tariff-related uncertainty, immigration policies, inflation, global economic turmoil, etc. Markets expect the Federal Reserve to cut interest rates in an attempt to boost employment. But there can always be black or gray swans.

Will OpenAI be allowed to convert to a for-profit by March 6th 2026?

Forecasters estimated a 22% chance (range, 15% to 50%) that OpenAI would become a for-profit in this timeframe. Forecasters pointed out that OpenAI is well resourced and has allies with political power, but it also currently appears to be losing the argument in public and alienating the attorneys general of California and Delaware, who have the power to stop the transition.

Will an Epstein client list be released by the US government by March 6th 2026?

We operationalized the question as resolving positively when Rep. Marjorie Taylor Greene is satisfied that such a list has been released. She has recently been very outspoken on the issue and has stood with the victims.

Forecasters estimated that there is a 4% probability (range: 0.4% to 17%) that this will occur. Forecasters thought this outcome is unlikely for several reasons, including that this would probably not be consistent with standard legal practice, the US government may not have collected such a list, and names on such a list could include very prominent individuals. Speaker Johnson has made it very clear that he does not intend to facilitate further disclosures regarding Epstein. On the other hand, there was already one previous release, and it’s possible that there would be another that would resolve this question positively.

Forecasters also estimated that there is a 44% chance (range: 20% to 55%) that victims of Epstein would release their own list by March 6th. They have stated that they will. However, powerful interests or implementation hurdles could mean that this doesn’t happen in the end.

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Economy

The US labor market weakened in August, continuing the downward trend in new job numbers seen in recent months. The Bureau of Labor Statistics report, released on Friday, showed that nonfarm jobs increased by 22,000 in August, while the unemployment rate ticked up to 4.3%, from 4.2% in July. Revised figures also showed that the economy lost jobs in June. And, for the first time since April 2021, there were more unemployed people in July than positions available. Slowing job growth is raising fears of economic stagnation, stagflation or recession, because of rising costs and uncertainties due to tariffs, reduced spending and staff cuts by the federal government, and immigration crackdowns.

With the weak August US jobs report, the Fed is expected to shift its focus from inflation to the labor market and hence to lower interest rates, most likely by 25 basis points (bp), at its policy meeting to be held September 16-17. Bank of America projects 25 bp rate cuts both this month and in December, and an additional 75 bp by the end of next year. Morgan Stanley and Citigroup expect similar rate cuts this year; Morgan Stanley also sees a potential for larger cuts by the end of the year.

Beyond a weakening labor market and creeping inflation, a number of other US economic indicators are also concerning. Serious credit card delinquencies are approaching those seen in and following the Great Recession. Delinquencies on commercial mortgage backed securities rose to 7.29% in August, and the office-specific delinquency rate has reached an all-time high of 11.66%. The seasonally adjusted monthly construction quit rate, a measure of the health of the construction industry and a leading economic indicator, has fallen to a level not seen since August 2009. Demand for residential land has fallen, and housing construction starts are expected to follow.

Bond markets worldwide are showing increasing signs of stress. In particular, 30-year sovereign bond yields are rising to high levels in the US, the UK, Germany, France, Japan, Switzerland, Canada, Australia and New Zealand, among others. When Japanese PM Ishiba steps down in the coming weeks, he will probably be replaced by a leader who is less of a fiscal hawk, and the Japanese bond market may react unfavorably. The Japanese bond market is already facing a liquidity crisis. Rising 30-year yields increase the chance that a government may resort to yield curve control to keep long-term yields in check and stimulate the economy.

With all of these flashing economic indicators, gold prices hit a record of nearly $3,600 per troy ounce last week and are expected to just keep going. The price of gold has surged 37% through September 5 this year, while the S&P 500 has risen 10.20%. Goldman Sachs forecasts that gold could rise to $3700 by the end of 2025 and above $4,000 by mid-2026 - or as high as $4,500, if private investors shift heavily into gold. "Gold remains our highest-conviction long recommendation," Goldman Sachs said last week.

Rising gold prices reflect growing worries about the world economy. Goldman Sachs “said that a loss of Fed independence could trigger higher inflation, a rise in long-end bond yields, weaker equities, and a decline in the dollar’s reserve currency status – while gold, as a store of value not reliant on institutional trust - stood to benefit.” Mohamed El-Erian, the former CEO of a $2T investment manager, commented, “Why point out another record high for the price of gold, especially as we've already had 26 record closes this year alone? It's because this phenomenon provides contextual insights into broader developments in the global financial landscape. These price records aren't just about gold; they signal an evolution in how foreign central banks and investors are managing risk, including those relating to currency and government bonds.”

Indeed, gold prices are rising in part because central banks worldwide are increasing their gold holdings – and reducing their exposures to the dollar and dollar-denominated assets. Foreign central banks now hold more gold than US Treasuries. Gold now accounts for 27% of their reserves, while Treasures make up an estimated 23%. Gold also recently passed the euro to become the second-largest global reserve asset after the US dollar, which still reigns supreme. China increased its gold holdings for the tenth month in a row, as it seeks to diversify away from the US dollar.

Via Bloomberg and Reuters

And: The Trump administration is instituting a rule change that will go into effect this fall that will allow US banks to hide troubled loans in their lending portfolios. Russian central bank data show that the Russian economy is in recession and that inflation fell from 9.40% in June to 8.79% in July. Shell has canceled plans to build a sustainable aviation fuel (SAF) plant in Rotterdam, as SAF costs have not fallen sufficiently to spur its widespread adoption.

Geopolitics

Asia

Via Wikimedia Commons

China’s President Xi hosted leaders of India, Russia and North Korea and others for talks on economic cooperation, as well as a large military parade commemorating the 80th anniversary of China’s WW2 victory over Japan.

Following the parade, President Xi called for the acceleration of the construction of a world-class military, and to safeguard national sovereignty, unity and territorial integrity. A Foreign Policy article by Sam Roggeveen argues that China’s military is now the world’s leader technologically, and increasingly regionally. At the meeting of the Shanghai Cooperation Organization (SCO) from August 31 to September 1, China announced plans to set up a development bank to be run by the SCO.

US President Trump commented, “Please give my warmest regards to Vladimir Putin, and [North Korean leader] Kim Jong Un, as you conspire against The United States of America.”

And: Taiwan accused China of breaking international law by drilling for oil and gas inside the island nation’s exclusive economic zone. Several oil rigs owned by China’s state-run offshore drilling company were recently discovered and may have been operating for years. A US seal team sank a North Korean fishing boat and killed all personnel on board in a botched operation during the first Trump administration.

United States

Epstein files: Marjorie Taylor Greene and others broke with Trump about the full release of the Epstein files. House Speaker Mike Johnson claimed Trump was an FBI informant, but later backed away from this claim.

Immigration: A federal appeals court ruled against the Trump administration’s use of the Alien Enemies Act to deport Venezuelans. In Chicago, protestors are holding demonstrations, and city leaders have spoken against the anticipated deployment of federal agents to the city in a crackdown against illegal immigration.

ICE detained 475 people in a raid at a combined Hyundai and LG plant in Georgia. Most of those detained were South Korean citizens, and the detainees included business visitors from South Korea. South Korean officials were not pleased, but an agreement has been reached to release the South Korean detainees.

Preliminary Census Bureau data analyzed by the Pew Research Center show that more than 1.2 million immigrants, both illegal and legal residents, left the labor force from January through the end of July.

Three men who were deported to Eswatini in July have been held in a maximum-security prison for seven weeks without any charge filed and with no access to legal counsel, according to their lawyers.

And: The Department of Defense was ceremonially renamed the Department of War. Trump claims the US “never fought to win” any wars since WWII after the name was changed from the Department of War to the Department of Defense. Grand juries are usually easy for prosecutors to convince to make indictments, but there have been some recent cases in DC, amid President Trump’s policing surge, where they have refused. One case that got significant attention was an incident in which a protester threw a sandwich at a federal officer.

The Rest of the Americas

A US missile strike sank a Venezuelan boat in international waters and killed all 11 people on board. Experts have questioned whether this act contravened international law. US VP Vance said he doesn’t care.

The US has been conducting a large US amphibious landing exercise in Puerto Rico.

The Trump administration refuses to tell Congress what the scope of military activities in Venezuela will be. A letter from the White House to the House Speaker and the Senate president pro tempore stated that, “It is not possible at this time to know the full scope and duration of military operations that will be necessary.

Brazil’s Supreme Court is expected to hand down a verdict on Tuesday in former President Bolsonaro’s trial on coup charges. Brazil’s population is divided over the charges.

Europe

A week and a half ago, European Commission President von der Leyen said that Europe was developing “pretty precise” plans for potential deployments in the event of a peace deal in Ukraine. This week, President Macron of France said that 26 nations are now committed to providing security guarantees to Ukraine. Macron said that, “The day the conflict stops, the security guarantees will be deployed,”, and that the role of the United States in such guarantees would be finalised in the coming days.

In response, Russia’s President Vladimir Putin said that any Western troops situated in Ukraine as part of a “Coalition of the Willing” force would be “legitimate targets”.

One of our forecasters comments on the current situation: I estimate that there’s less than a 1% chance of European troops being deployed to Ukraine by the end of 2025. This is because I think it’s extremely unlikely that there will be a peace deal by then — even if there’s a ceasefire, a peace agreement will probably take a long time to work out — and I also think it’s unlikely that there will be a significant Russian breakthrough that causes Europe to scramble forces to Ukraine to save the western part of the country.

Ukraine has destroyed 17-21% of Russian refining capacity, with the intent of reducing their energy supply and their ability to profit from exports of refined petroleum products. These attacks have worsened gasoline shortages in the country and forced Russia to extend a ban on exports of refined petroleum products, including gasoline, through October 31.

European defence procurement spending now exceeds that of the US for the first time since WWII. However, US military spending overall still exceeds that of Europe, although Europe’s spending is accelerating. Procurement includes equipment, but doesn’t include salaries or facilities.

Russian ships continue to loiter around the Baltic Sea and Danish Straits, likely to spy on Western activities, ships and locations.

Middle East

Belgium became the latest country to commit to recognising the State of Palestine at the UN General Assembly this month, following similar commitments from France, the United Kingdom, Canada and Australia. Such commitments have led some Israeli ministers, including Ben Gvir and Smotrich, to call for the formal annexation of large swaths of the West Bank, with Smotrich declaring that “the principle is maximum land with minimum Arabs”. The United Arab Emirates (UAE), the most high-profile Islamic country to sign the Abraham Accords, warned Israel against such a move. It would also make the normalisation of relations between Israel and Saudi Arabia even less likely.

Israel is mobilizing reservists as it pushes forward with the initial stages of its Gaza City offensive. At least 21,000 children in Gaza have been disabled as a result of Israel’s war on Hamas, according to a UN committee.

Two gunmen from Ramallah in the West Bank opened fire on a bus in Jerusalem, killing 6 people. It is the worst such attack in nearly a year. Israeli forces are surrounding areas on the outskirts of Ramallah searching for accomplices and increasing their presence.

Syria detained defense and interior ministry members suspected of abuses against the Druze population in Sweida. The Druze minority inhabits parts of Lebanon, Syria, and Israel. The Druze in Israel have joined the IDF in significant numbers and have the backing of Israel in Syria.

Executions in Iran increased 70% in August compared to one year ago, according to a human rights organization.

A Houthi drone hit an Israeli airport, halting flights.

Africa

In Sudan, the Rapid Support Forces commander was sworn in as head of a parallel government. Seven people were killed and 71 injured in recent RSF shelling on Sudan’s El-Fasher.

Herdsmen killed seven Christians in central Nigeria. The US approved $32.5 million in assistance to Nigeria to provide food assistance and nutritional support to internally displaced people in areas of northern Nigeria affected by conflict. More than 1.3 million people are facing hunger in the area.

Artificial Intelligence

OpenAI is legally pursuing non-profits that have publicly opposed its attempt to convert from a non-profit to a for-profit company. It has had subpoenas issued against three such nonprofits, including Encode and The Midas Project, as part of its legal battle against Elon Musk over its for-profit conversion. OpenAI’s rationale for doing so is that they claim that Musk has or had some involvement with these nonprofits. We aren’t aware of evidence beyond the subpoenas themselves that suggests that this could be the case.

California’s and Delaware’s attorneys general sent a letter to OpenAI that harshly criticized the company for the recent ChatGPT-associated deaths, referring to the suicide of a teenager and a murder-suicide that occurred following conversations with the AI.

The recent deaths are unacceptable. They have rightly shaken the American public’s confidence in OpenAI and this industry. OpenAI – and the AI industry – must proactively and transparently ensure AI’s safe deployment. Doing so is mandated by OpenAI’s charitable mission, and will be required and enforced by our respective offices.

The attorneys general each have the power to block OpenAI’s attempt to convert to a for-profit company.

OpenAI will be changing its ChatGPT application so that parents can receive alerts if their children show acute distress while using ChatGPT.

OpenAI is also planning to launch a new AI chip next year, partnering with Broadcom — which recently announced a $10 billion chip order from an unnamed customer. OpenAI board chairman Bret Taylor’s Sierra AI agent startup has raised $350m at a $10 billion valuation.

Anthropic settled its recent class action lawsuit by authors for $1.5 billion. It’s thought to be the largest-ever copyright settlement. Anthropic’s Claude for Chrome browser extension raises security concerns, as it poses an attack surface for browser hijacking.

US Senator Josh Hawley (R-MO) gave a speech at the National Conservatism conference that was highly critical of AI development and the transhumanist/posthumanist ideology that has historically been a significant driver for AGI development. Hawley made four policy proposals in his speech, including a proposal for government inspections and oversight over AI development, particularly in order to protect children. Tina Nyugen wrote an interesting piece in The Verge about the conference. It appears that overall sentiment at the conference was very negative towards AI development.

An AI startup, Flock Safety, is aiming to eliminate crime in the US. Over 80,000 Flock cameras collect data that are often shared with law enforcement agencies in the US, and now the company is looking to partner with drone companies to expand surveillance.

And: In a recent survey of IT and security businesses, 99% of respondents said that AI would influence their cybersecurity purchases and renewals over the next year. ASML invested $1.5B into Mistral, becoming its top shareholder. The UK AI Security Institute wrote about managing the risks from increasingly capable open-weight models.

More tech

Cloudflare blocked the largest-ever DDOS (denial of service) attack, at 11.5 Tbps, and has been blocking an increasing number of such attacks lately.

China’s Salt Typhoon, an “advanced persistent threat actor”, may have stolen data on nearly every American.

Internet cables passing through the Middle East were cut. A wide range of robots are increasingly being developed for and used in agriculture.

A federal judge ruled in an antitrust case against Google that the company can keep its Chrome browser and Android operating system. Google will have to share search data with competitors, however.

Biorisks

The chikungunya virus continues to spread in southern China. A new ebola outbreak in the Democratic Republic of Congo has killed over a dozen people.

Climate and Nature

A climate pattern that will likely cause a long-term megadrought may be “locked in” by human-caused shifts in the Pacific decadal oscillation (PDO), according to a study published in Nature.