From Saudi Arabia’s increasingly constrained oil routes to Canada’s closer ties with Europe, governments spent the week looking for ways to reduce dependencies that have become more difficult to manage. The results showed both the appeal and the limits of diversification.
This was less an inflection point than another stage in adjustments already under way. Saudi Arabia confronted simultaneous risks around the two maritime routes on which its oil exports depend. Canada and European governments continued developing additional economic and security relationships without abandoning existing ones. Meanwhile, the Iran war continued to feed through energy markets into inflation, interest rates and trade policy.
The common thread was dependence. Governments have alternatives but those alternatives come with their own constraints. Saudi Arabia provided the clearest example of what happens when redundancy proves less robust than expected. Elsewhere, states are trying to diversify before their own dependencies become similarly difficult to manage.
Saudi Arabia’s difficulties this week extended beyond the loss of a pipeline. They exposed how quickly one alternative can create dependence on another.
With the Strait of Hormuz constrained by war, the East-West Pipeline allowed Saudi crude to reach the Red Sea. An attack then forced that route offline just as Houthi forces expanded their position around Bab al-Mandab. Riyadh consequently faced risks around both directions through which its oil could reach international markets.
The search for answers broadened. The US and European countries declined to provide direct military backing for a Saudi counteroffensive in Yemen. Crown Prince Mohammed bin Salman sought Egyptian help. Saudi Arabia appealed to China, prompting Beijing to ask Iran to use its influence with the Houthis. By Friday, Riyadh was also trying to restore part of the pipeline while sending some crude back through Hormuz in US-protected convoys for transfer off Oman.
Each provides some room for manoeuvre. None yet provides a complete solution.
Elsewhere, diversification is taking a less urgent form.
Canada continued seeking deeper economic and security ties with Europe as its relationship with Washington became more difficult. Ottawa has joined the EU’s Security Action for Europe defence fund, applied to join the British-led Joint Expeditionary Force and discussed greater cooperation with Europe across defence, technology, energy and critical minerals.
European governments are also adding capabilities. Finland joined France’s Forward Deterrence Initiative, while insisting NATO remains its primary security framework. NATO Secretary General Mark Rutte called for greater European investment and military strength within the alliance.
These developments do not amount to replacement of the United States. Around 70% of Canadian exports still go to the US, while Finland explicitly places its new nuclear cooperation within a wider NATO framework.
What they illustrate instead is an attempt to widen the available options while maintaining existing relationships. Diversification can reduce dependence without eliminating it.
The economic transmission of the Iran war is not new. This week provided further evidence of how widely it is travelling.
Energy remains the most direct channel. Brent remained above $100 a barrel on Friday after earlier exceeding $108 as Saudi export routes came under strain. Higher energy costs are also appearing alongside broader inflation and interest-rate concerns.
The Federal Reserve raised its benchmark rate by 0.25 percentage points to 3.75%-4%, with inflation at 3.4% in August. Chair Kevin Warsh said higher energy prices had followed the Iran war and that the Fed could not control individual oil or food prices, but could prevent those increases spreading more broadly.
The effects extend beyond monetary policy. The US 10-year Treasury yield reached 5% during the week, with higher energy prices among the forces driving yields higher. India also warned that proposed US tariffs on major buyers of Russian energy could affect bilateral ties and international energy markets.
Conflict continues to reach well beyond the battlefield.
International institutions also provided reminders of an older reality: cooperation continues even when the states operating within those institutions disagree sharply.
Russia and China vetoed a US-backed Security Council resolution that would have renewed independent monitoring of sanctions on Iran. Eleven members supported the extension, but Moscow and Beijing argued that the sanctions had expired and called instead for a diplomatic end to the US war with Iran.
Washington, meanwhile, paid $725 million towards the UN regular budget, removing the immediate risk that it would lose its General Assembly vote in 2027, while still owing $1.312 billion.
BRICS offered another version of the same dynamic. Its members reached a joint declaration despite divisions over Iran and Ukraine by adopting broadly worded positions that avoided naming key countries.
None of this is particularly new. Institutions continue to provide mechanisms for cooperation, disagreement and compromise, while the governments inside them continue to pursue different positions.
The week’s developments did not create a new international order. They showed how much adjustment is already taking place within the existing one.
Saudi Arabia is searching urgently for export routes, diplomatic help and security support because its available alternatives have narrowed. Canada and European governments are widening economic and security relationships without replacing the United States. The Iran war continues to travel through energy markets into monetary policy and trade. International institutions continue operating despite conflicting national positions.
The distinction is important. Diversification can create additional options, but it does not necessarily remove dependence. This week, Saudi Arabia showed what can happen when several alternatives become constrained at once.