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Frank Kelly’s Geopolitical Week Ahead | June 22, 2025

6/22/2025

The U.S. attacked Iran – Now what? The NATO Summit Convenes followed by the European Council, the Shanghai Cooperation Organization defense ministers meet, and Fed Chair Powell's Congressional testimony on the economy

Francis (Frank) J. Kelly

Founder & Managing Partner, Fulcrum Macro Advisors LLC and Senior Political Strategist for DWS

The U.S. attacked Iran – Now what?
The NATO Summit Convenes followed by the European Council
Shanghai Cooperation Organization defense ministers meet
U.S. Senate and the One Big Beautiful Bill Act
Fed Chair Powell's Congressional testimony on the economy
Global economic radar screen

The U.S. attacked Iran – Now what?
As we write this, the world is waking up to learn that President Donald Trump ordered the attack on three Iranian nuclear sites – Fordow, Natanz, and Isfahan – and, reportedly, a number of other strategic Iranian sites.

According to Trump Administration officials, the attacks “obliterated” the targets but U.S. Chairman of the Joints Chiefs of staff General Daniel Caine said it was “way too early” to comment on whether Iran retained nuclear capabilities. Damage assessments are being conducted by the U.S. and Isreal, and we are likely to learn a lot more of the effectiveness of the attacks in the coming days.

Additionally, as Israeli Defense Force (IDF) sources have said, “It is too early to tell” if Iran moved any fissile materials from Fordow before the strike. What we are watching for now, are three things:

What will Iran do to retaliate against the U.S.? Will they attack U.S. forces stationed in the region (there are close to 50,000 U.S. troops stationed at a number of bases in the Middle East).
Will Iran move to shut down the Strait of Hormuz (as Iran’s Parliament voted to do this morning) paralyzing energy shipping and further raising tensions in the region with Gulf State nations. Only the Iranian Supreme Leader Ayatollah Ali Khamenei, can make that decision which ultimately would severely damage Iran’s already brittle economy.
Will Iran dare to activate suspected sleeper cells in the U.S. and elsewhere to attack? Do they even have such cells in the U.S.?

The NATO Summit Convenes followed by the European Council
As all this takes place, the 2025 NATO Summit begins on Tuesday in the Netherlands, bringing together the leaders of all the NATO members including President Trump. Other non-NATO heads of state have been invited to attend including the Prime Ministers of Australia, Japan, New Zealand, and Ukraine as well as the Presidents of South Korean, the European Council and European Commission.

There are two things markets should watch at the Summit:

Will Japanese Prime Minister Ishiba and new South Korean President Lee get a chance to talk with Trump on the sidelines to secure trade agreements (something they had hoped to do at the G7 but did not happen as Trump left the summit early to return to Washington to deal with Iran).
And second, will NATO members collectively agree to an increase to defense spending targets from 2% of GDP to 3.5% for defense spending with an additional 1.5% for infrastructure spending – bring the level to 5% of GDP? And by what timeline – 2030 or 2035?

European leaders will then roll into a European Council meeting on Thursday where the Middle East will again dominate the agenda as will defense spending and trying to figure out a trade agreement with the U.S.

Shanghai Cooperation Organization defense ministers meet
Elsewhere in the world this week, the defense ministers of the Shanghai Cooperation Organization (SCO) will be meeting in China. The SCO is composed of Belarus, China, India, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Uzbekistan, and Tajikistan and again, the situation in Iran will dominate the agenda. But it is expected the SCO may touch on ongoing border tensions between India and China, ongoing tensions between Pakistan and India, and Ukraine.

U.S. Senate and the One Big Beautiful Bill Act
In Washington this week, the two big events will be the U.S. Senate’s continued efforts to hammer out a compromise among Senate Republicans on President Trump’s One Big Beautiful Bill Act. Senate Majority Leader John Thune (R-ND) has said he wants to bring it to a vote this week but we believe it likely to slip into next week as Congress is going to be distracted by President Trump’s Iran action along with real disagreements on the substance of the bill, mostly around state and local taxes (SALT) exemptions and Section 899 which would give the US Treasury the power to place tough taxes on foreign corporations from countries that place heavy taxes on US corporations.

Fed Chair Powell's Congressional testimony on the economy
The second event markets are going to be watching closely is Federal Reserve Board Chair Jay Powell’s testimony Tuesday before the House Financial Services Committee and Wednesday before the Senate Banking Committee on the state of the economy. With all that is going on geopolitically and with President Trump’s tariffs, these should be lively hearings (to say the least).

Global economic radar screen
Looking at the global economic radar screen this week, beyond Powell’s testimony markets will be listening closely to European Central Bank President Christine Lagarde’s’ comments Monday before the EU Parliament and Bank of England Governor Andrew Bailey’s testimony before the House of Lords.

In the US, the May PCE report is released this week as well as Q1 GDP numbers. And the Conference Board’s consumer confidence index is out on Tuesday.

In Asia, Japan’s June CPI are released Friday as well as the Bank of Japan’s minutes from their last meeting on Wednesday. China’s May Industrial profits are out on Friday, too.

In Europe, the Eurozone’s June economic sentiment reports are out on Friday, Germany’s Ifo Survey on Tuesday, and France and Spain’s June CPI on Friday.

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Francis (Frank) J. Kelly

Frank is the Founder and Managing Partner of Fulcrum Macro Advisors LLC, a political risk advisory firm based in Washington, DC. He is the senior political strategist for DWS.

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Frank Kelly’s Geopolitical Week Ahead | June 22, 2025

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