Economy

For more than seven decades, the US Federal Reserve stood as a fortress at the core of America’s economic success: the steward of the world’s reserve currency and the institution markets trusted to anchor financial stability. It acted as lender of last resort with a dual mandate – controlling inflation on the one hand, supporting economic growth on the other. For most of this period, monetary policy was entrusted to independent professionals, formally insulated from both the executive and legislative branches of government. That independence, however, was never a constitutional given. It was a carefully constructed institutional equilibrium – one that markets gradually came to treat as permanent. That assumption is now being tested. Why Central Bank Independence Matters More Than Interest Rates Markets tend to focus on what central banks do – raise or cut rates – rather than why their actions are believed. Yet monetary policy works only because it is credible. Credibility allows a central bank to influence long-term expectations with short-term actions. It rests on a simple but essential principle: the central bank must be able to act against political convenience. In the United States, that principle has been protected since the Treasury–Federal Reserve Accord of 1951 and reinforced by statutory language allowing Federal Reserve governors to be removed only “for cause.” In practice, the Fed functioned as a technocratic fortress – not because it was unassailable, but because challenging it carried a high political and legal cost. This distinction matters. Markets do not only price policy decisions. They price the credibility of the institution making them. And that credibility is now under direct threat. Presidential Control Over the Fed Becomes a Political Priority Since returning to office for a second mandate, Donald Trump has been unusually explicit about his desire for a more accommodative Federal Reserve: lower interest rates to ease the burden of a highly leveraged economy, and a monetary posture more closely aligned with the White House’s priorities. Tensions with Jerome Powell were always expected to be vocal. Until recently, markets largely dismissed them as political theatre. January 2026 changed the category entirely. The Department of Justice opened a criminal investigation into Powell, while the Supreme Court agreed to hear a case that could redefine – or even eliminate – the legal protections shielding Federal Reserve governors from presidential removal. The investigation into Powell – officially related to a building renovation, but widely perceived as politically motivated – represents a qualitative escalation. Never before has a sitting Fed Chair faced criminal exposure in connection with monetary policy decisions. The message is unmistakable: restrictive policy may now carry personal legal consequences. This is not merely pressure on one individual; it is a warning to every current and future Fed Chair and Governor. Simultaneously, in Trump v. Cook, the Supreme Court will revisit the doctrine underpinning Federal Reserve independence. A ruling allowing governors to be dismissed at will would fundamentally alter the Fed’s reaction function – not through ideology, but through incentives. A central banker who knows that policy disagreement can end a career will behave differently. Not out of weakness, but out of institutional logic. Succession Risk: The Nomination of a Dovish Chair A third risk now enters the equation: succession. Powell’s term as Chair expires in mid-May 2026, and the very public search for a replacement has become part of the market signal. Personnel, in monetary policy, is policy. One name increasingly associated with a more dovish, market-friendly turn is Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock – widely regarded as pragmatic, market-savvy, and sympathetic to the view that interest rates should fall sooner and faster. The nomination of a dovish Chair is not, in itself, bad news for the Federal Reserve. Rieder has overseen approximately $2.4 trillion in global bond strategies and would likely be the most market-experienced Fed Chair in history. His understanding of fixed-income mechanics and financial plumbing is widely respected. His views on monetary policy also appear broadly aligned with President Trump’s preference for lower rates. Past statements suggest he might favour an early move toward less restrictive policy and a more active use of the Fed’s balance sheet to achieve targeted outcomes – for example, redirecting reinvestments toward agency mortgage-backed securities rather than Treasuries to support housing affordability. However, the very qualities that could reassure markets also carry risks. A Chair with strong trading-floor instincts may be more reactive to asset-price volatility, raising concerns that monetary policy could adjust more frequently than necessary. A willingness to use the balance sheet to influence specific sectors could blur the line between monetary and fiscal policy – precisely the boundary central bank independence was designed to protect. Senate confirmation would also pose a significant hurdle. Democrats would likely scrutinize potential conflicts of interest with BlackRock and question the absence of prior public-sector experience. Markets Remain Calm – Perhaps Too Calm For now, financial markets remain remarkably composed. Bond volatility is subdued. Equity markets continue to price an orderly easing cycle. The dollar trades as if the Fed’s institutional architecture were intact. That calm is deceptive. The credibility risk is still underpriced. And it may not survive contact with reality. The danger is not simply that inflation returns – although rising commodity and energy prices already point in that direction. The deeper risk is that the mechanism anchoring inflation expectations – the perceived independence of the central bank – begins to crack. When that happens, adjustment is rarely smooth. The front end of the yield curve may rally on promises of easier policy, while the long end sells off as investors demand a higher premium to hold dollar-denominated duration in a world where monetary policy is no longer insulated from politics. The secular debasement of the US dollar, already visible in the surge of gold and silver prices, could accelerate. The recent 5% decline in the US Dollar Index over just two weeks may prove an early warning. At the same time, US long-dated Treasury yields are increasingly compressed within a critical technical wedge around the 4.90% level. A decisive break to the upside would open the door to a rapid repricing toward 6%–6.5% — a move that would send powerful shockwaves through global bond, equity, and currency markets. Conclusion The Federal Reserve and its new Chair may cut short-term rates – but still trigger a repricing of both the dollar and the bond market – if investors conclude that it has lost its institutional shield. The greatest risk confronting markets today is not inflation itself or monetary policy. It is the erosion of the mechanism that has anchored inflation expectations for more than three quarters of a century: the credibility of an independent central bank. That credibility, once questioned, is extraordinarily difficult to restore.

The Exclusive Economic Zone (EEZ) delimitation agreement between Lebanon and Cyprus, signed on November 26, 2025, and endorsed by Decree No. 2108 of December 16, 2025, marks a major step in Lebanese maritime policy. Officially presented as a means to guarantee the exploitation of maritime resources, this agreement nevertheless raises deep concerns from legal and strategic perspectives. General Khalil Gemayel, an expert in maritime border delimitation, believes that this agreement, despite some advantages, remains largely unfavorable to Lebanon. It certainly puts an end to a long-standing dispute, but at what cost? According to him, one of the main achievements lies in the resolution of the maritime dispute that had pitted Lebanon and Cyprus against each other for nearly two decades. This legal clarification puts an end to a grey area that hindered any energy planning. He also emphasizes that the agreement officially extended the Lebanese maritime border with Cyprus from point No. 1 to point No. 23, now a maritime junction point between Lebanon, Cyprus, and Israel. However, this extension was carried out using the Median Line Method, an approach that, according to General Gemayel, clearly favors Cyprus. He believes that the resolution of the dispute, despite its apparent importance, was made at the expense of Lebanese interests. An Unequal Agreement General Gemayel considers the agreement unfair to Lebanon due to the methodology adopted. He explains that the delimitation is based on a median line drawn between an island, Cyprus, and a continental coastal state, Lebanon. However, international maritime jurisprudence favors a three-stage methodology: the drawing of a provisional median line, the consideration of relevant circumstances, and then the conduct of a final Proportionality Test. He regrets that this approach was not applied, due to the absence of a proportionality test between the lengths of the opposing coasts. In this context, General Gemayel specifies that the relevant Lebanese coast extends for approximately 188 kilometers, compared to 103 kilometers for the corresponding Cypriot coast. This ratio of 1.82 in favor of Lebanon, versus 1 for Cyprus, should have led to a more balanced delimitation. According to his analysis, the non-observance of this principle resulted in the loss of approximately 2,600 square kilometers of Lebanon's exclusive economic zone to Cyprus. He adds that the 2025 agreement essentially adopts the same delimitation methodology as the one adopted in the agreement signed in 2007 between the two countries. This text, which had not been ratified or applied due to its imbalances, had remained frozen for nearly 18 years. An Institutional Contradiction General Gemayel highlights an institutional contradiction. He recalls that in 2022, a joint Lebanese ministerial commission was formed to examine the issue of maritime borders with Cyprus. This commission had recommended the adoption of the three-stage methodology and the consideration of proportionality between the coasts, explicitly recognizing that the median line was detrimental to Lebanon. Yet, in 2025, a new ministerial commission, composed of the same ministries, overturned the previous recommendations and validated the delimitation based on the median line. This is precisely the method that Lebanon had long rejected and which led to the freezing of the 2007 agreement. From Legal Agreement to Sovereignty Challenges Beyond General Gemayel's technical analysis, this agreement illustrates a recurring problem in international negotiations: the search for a quick and clear solution can come at the expense of technical principles and long-term strategic interests. The fundamental achievement of the agreement – the legal clarification of maritime borders and the end of the historical dispute with Cyprus – is undeniable and offers legal stability likely to encourage investment in maritime areas. However, the methodology adopted reflects a disregard for internationally recognized technical standards, particularly the final proportionality test. The use of the median line without adjustment for coast length indicates a political compromise, likely motivated by the desire to quickly conclude an agreement after 18 years of deadlock. This choice leaves Lebanon facing a tangible loss of exploitable maritime areas. This strategic choice, while providing clear borders, weakens future economic prospects, particularly concerning gas and oil resources. Finally, the discrepancy between the 2022 commission's recommendations and the 2025 final approval highlights a persistent governance problem in Lebanon: the continuity of the technical and institutional approach is sometimes sacrificed for the sake of opportunistic political decisions. The result is an agreement that provides border clarity but raises legitimate questions about the protection of national interests and the country's ability to adopt a coherent and sustainable maritime strategy.

For much of the past four years, global energy markets have appeared deceptively calm. Oil prices have fallen by more than half since their US$ 130 peak in 2022. Natural gas prices have normalized after the shock of the war in Ukraine. Renewable energy headlines dominate the narrative, reinforcing the idea that fossil fuels are gradually being relegated to history. At first glance, the world seems well supplied. Yet beneath this surface calm lies a far more unstable reality — one shaped by chronic underinvestment, physical depletion, geopolitical concentration, and rising structural demand. The global energy system today is not resilient. It is balanced on a knife edge. The Illusion of Oversupply At around $60 per barrel, oil prices suggest abundance. The International Energy Agency projects global oil supply growth of 3.1 million barrels per day in 2025, comfortably outpacing consumption. The consensus among analysts points toward continued weakness, reinforcing the belief that energy scarcity belongs to the past. But prices at these levels come with a cost. When oil trades below the marginal cost of new production, investment slows. Not immediately, and not dramatically — but persistently. Over time, this erodes the system’s ability to respond to shocks. In the United States, shale oil — the backbone of global supply growth over the past decade — is already showing signs of strain. Shale production was the primary driver behind America’s shift from being the world’s largest oil importer to achieving self-sufficiency and eventually becoming a net exporter. Today, shale dominates U.S. crude production, accounting for roughly two-thirds of total output, driven by technological advances such as hydraulic fracturing and horizontal drilling, with the Permian Basin as the main contributor. However, when WTI trades below the marginal cost of new supply — currently estimated at $70 per barrel by Enverus Intelligence Research for U.S. shale, with all-in corporate breakevens closer to $62.50 according to Rystad Energy — investment inevitably contracts. Drilling activity has already begun to decline as prices fall below incentive levels. Because shale wells decline rapidly, losing up to 50% of their output in the first year, continuous drilling is required simply to maintain production. Today’s drilling weakness therefore translates into lower production tomorrow. Globally, conventional oil fields decline by 4 to 6 percent per year. Maintaining current output requires replacing millions of barrels per day annually. When investment falls short, shortages do not appear instantly. They accumulate quietly. This is how energy markets flip from surplus to deficit. And when deficits emerge, repricing can be violent. Natural Gas: The Logistical Fault Line The global energy system rests on a quadrangular equation: Oil remains the backbone, supplying roughly 30% of total global energy Renewables provide intermittent supply Nuclear provides baseload — slowly Natural gas delivers flexibility, reliability, and speed Natural gas has become central to modern electricity systems. It provides the responsiveness and stability that renewables cannot yet deliver at scale. Natural gas is uniquely sensitive to temperature — not because demand is speculative, but because heating and cooling are non-negotiable. Cold winters in Europe, North America, or Northeast Asia immediately tighten balances. Hot summers do the same through power demand. Gas fills the gap. Gas production is not immune to decline. Persistently low prices over the past two years have led to reduced drilling in dry-gas basins, capital reallocation toward oil-weighted plays, and deferred investment in pipelines and infrastructure. Unlike oil, however, the primary constraint for natural gas is not production, but distribution: pipelines, LNG terminals, shipping fleets, specialized storage facilities, and port infrastructure. Liquefied natural gas has globalized the market. Europe, having sharply reduced its reliance on Russian pipeline gas, now depends heavily on LNG imports. Asian demand continues to grow. The United States has emerged as the world’s largest LNG exporter, tying domestic gas markets ever more closely to global demand and logistical capacity. As a result, disruptions are no longer regional. They are systemic. Energy Demand Is Rising Again, Quietly While public attention remains focused on declining fossil-fuel demand driven by electric vehicles and the spectacular growth of solar power, a new driver of energy demand is emerging: artificial intelligence. The AI revolution is not only about chips and software. It is about energy. By 2030, global data-center electricity consumption is projected to reach between 950 and 1,600 terawatt-hours, driven primarily by AI workloads. For comparison, total U.S. electricity generation in 2024 was approximately 4,400 terawatt-hours. AI alone could increase U.S. power demand by more than 20% within five years. This energy must come from somewhere. Nuclear power plants have long lead times. Solar energy, while growing rapidly, still represents only around 5% of total electricity generation, and is expected to reach roughly 20% by 2050. Natural-gas infrastructure is complex and slow to develop. Oil therefore remains, for now, the cheapest and most immediately available source of energy. The result is a paradox: even as the energy transition accelerates, energy demand is becoming more rigid — not less. Concentration of Marginal Supply: Where the Fault Line Lies The United States is both the world’s largest consumer and the world’s largest producer of oil. It is effectively self-sufficient. China, by contrast, is the second-largest consumer, at roughly 16 million barrels per day, and the world’s largest importer. It relies on a diversified set of suppliers including the Gulf countries, Russia, Iran, Venezuela, and to a lesser extent Asian producers such as Indonesia, Brunei, and Myanmar. Until recently, China imported roughly 400,000 barrels per day from Venezuela, around 4% of its consumption — a flow that ended abruptly on January 3, 2026. In 2025, Iran ranked as China’s second-largest crude supplier in 2025, exporting 1.61 million barrels per day, or nearly 20% of China’s total imports. The greatest vulnerability in the global energy system lies not in demand, but in the concentration of marginal supply. Outside the United States, spare production capacity is extraordinarily concentrated. As of late 2025, OPEC+ spare capacity stood near 4 million barrels per day, roughly 4% of global consumption. On paper, this appears comfortable. In reality, it is not. Saudi Arabia controls approximately 2.4 million bpd The UAE controls around 850,000 bpd Iraq controls roughly 320,000 bpd Together, three countries hold around 70% of global spare capacity. Most other producers are already operating near maximum output. This concentration turns spare capacity from a buffer into a single point of failure. Concentration of Logistics: Where Geopolitical Risk Lies Nowhere is fragility more evident than in the Middle East. 20% of global oil consumption and a critical share of global LNG exports transit the Strait of Hormuz every day— a narrow maritime corridor between Iran and Oman with no realistic alternative. Any disruption, even temporary, would immediately expose how thin global buffers truly are. With Iran’s clerical regime facing its most serious internal and external pressures in decades, the risk of asymmetric escalation cannot be dismissed. Among the most consequential scenarios would be an attempt to disrupt maritime traffic through the strait. Such an event would represent a genuine Black Swan for global energy markets, forcing a sudden repricing of both oil and natural gas, particularly during peak winter demand in the Northern Hemisphere. A System Priced for Calm, Not Shock The prevailing narrative assumes stability: stable supply, manageable geopolitics, and a smooth energy transition. History suggests otherwise. Energy markets do not fail gradually. They fail at the margin — when low investment constrains long-term supply, when new technologies drive unexpected demand surges, and when high production and logistical concentration renders the system fragile. Under such conditions, shocks have outsized effects. Today, that margin is uncomfortably thin. Donald Trump’s renewed focus on Venezuelan oil — and potentially Iranian oil tomorrow — can also be interpreted through the lens of China’s strategic dependence on imported energy. The world is not short of energy yet. But it is dangerously short of resilience.

On December 26, 2025, the Council of Ministers adopted the so-called “Gap Law,” a text intended to provide a legal framework for the allocation of the country’s financial losses, estimated at around USD 70 billion, ahead of its forthcoming review by Parliament. The draft law was approved by 13 votes to 9. The law introduces a classification of depositors based on the volume of their assets and provides for a guarantee mechanism for deposits of up to USD 100,000, in the form of staggered repayments over a four-year period. For amounts exceeding this cap, the legislative framework provides for the conversion of deposits into long-term financial instruments issued by the Banque du Liban, structured as asset-backed securities. In this context, professional orders announced that they would hold a meeting on Monday to express their position regarding the measures set out in the law, particularly those affecting cooperative funds and pension funds. Business lawyer and international arbitrator Ezzeddine Akram Baassiri responded, in this context, to a series of specific and technical questions put to him by Levant Time . Q – How does the USD 100,000 guarantee cap apply to joint accounts? A – The law explicitly addresses joint accounts in Article 8, paragraph IV, which provides as follows: “IV – For the purposes of applying the provisions of this Article, the totality of the depositor’s personal accounts, as well as his or her share in joint accounts with all banks operating in Lebanon, shall be considered as a single deposit. Any inheritance account and any joint account, regardless of the number of its holders, shall be considered a single account. Joint accounts shall be apportioned among their holders in accordance with the terms of the agreement signed between them and the relevant bank; failing such terms, they shall be apportioned equally among the joint account holders. If the holder of joint accounts does not have a personal account with the bank, the totality of his or her shares in the various joint accounts shall be considered as a single deposit. The Banque du Liban shall determine the modalities for implementing this provision.” The text thus specifies the method for allocating the balance of a joint account, which is carried out: in accordance with the conditions set out in the account opening agreement signed with the bank; or failing any determination of each holder’s share, in equal shares among the account holders. On the basis of these provisions, several direct legal consequences arise. First, a joint account does not benefit from a separate or independent guarantee cap. Second, the value of the joint account is allocated among the co-holders either according to the account agreement or equally in the absence thereof, for the purpose of calculating each depositor’s total deposit. Finally, the share attributed to each co-holder is added to his or her individual accounts and to his or her shares in other joint accounts. Consequently, the USD 100,000 guarantee cap is calculated on the basis of the overall situation of each depositor, after taking into account all of his or her deposits, whether individual or derived from joint accounts. Q – Does the USD 100,000 guarantee cap apply per bank or per depositor? A – The draft law addresses the application of the guarantee cap where the same depositor holds accounts with several banks and adopts the principle of aggregating deposits across the entire banking system. In this respect, Article 8, paragraph IV, explicitly provides that: “The totality of the depositor’s personal accounts (…) with all banks operating in Lebanon shall be considered as a single deposit.” On the basis of this provision, the law establishes precise consequences: The USD 100,000 guarantee cap does not apply per bank; it is calculated per individual depositor, regardless of the number of banks with which that depositor holds accounts. Q- Are commercial companies and private institutions subject to the same rules as natural persons regarding deposit caps and treatment? A- The draft law includes legal entities within the definition of depositors. Article 2 provides that depositors are: “Depositors: natural or legal persons holding deposit accounts and certificates of deposit, in accordance with the legal definition of deposits and bank accounts provided by the laws in force and generally applicable, the rules of which are mainly set out in the Code of Obligations and Contracts and in the Commercial Code, in particular Article 307 thereof.” The text does not provide for any specific or exceptional regime in favor of commercial companies or private institutions. Chapter IV of the law, devoted to the repayment of deposits, contains neither exceptions nor special mechanisms applicable to legal entities. On this basis, several direct consequences clearly follow. First, commercial companies and private institutions are subject to the USD 100,000 guarantee cap. Second, their deposits are classified according to the same categories applicable to natural persons, namely small, medium, large, and very large deposits. Finally, the repayment mechanisms provided for in Article 8 of the law apply to them under the same conditions. Q – What is the fate of accounts denominated in Lebanese pounds, and what exchange rate will apply to them under the USD 100,000 cap? A – From a legal standpoint, the draft law includes accounts denominated in Lebanese pounds within its scope of application. Article 3 of the draft law provides that: “This law applies to the Public Treasury, the Banque du Liban, and banks operating in Lebanon and listed as banks. It also applies to all accounts held with the Banque du Liban and the aforementioned banks, whether opened before or after 17/10/2019.” In the same vein, Article 8, paragraph 4, provides that: “The totality of the depositor’s personal accounts, as well as his or her share in joint accounts with all banks operating in Lebanon, shall be considered as a single deposit …” The text makes no distinction between accounts denominated in foreign currencies and those denominated in Lebanese pounds. As a matter of principle, accounts in Lebanese pounds therefore fall within the scope of the law. However, Chapter IV of the law—and more particularly Article 8 and the provisions that follow—organizes the mechanism for repaying deposits and is exclusively limited to the repayment of deposits denominated in U.S. dollars. It does not explicitly address deposits in Lebanese pounds, nor does it provide any specific mechanism or direct method for repaying or revaluing such accounts in the context of the financial collapse. Consequently, in the absence of any express provision or clearly defined mechanism in the text, accounts denominated in Lebanese pounds remain legally unregulated with respect to their repayment modalities. It is not possible to determine with certainty the exchange rate that will be applied to their revaluation, nor whether they will be taken into account within the USD 100,000 cap, nor under what conditions they might be counted if included. Q – Cooperative funds and pension funds: what does the GAP Law actually provide, and what difficulties does it raise? A – The GAP Law draft does not, in reality, provide for any specific provisions dealing with these structures, nor with mutual funds. In the absence of a special regime, these entities are treated in accordance with the general rules set out in the text. Thus, pursuant to Article 2 of the law, professional orders, cooperative funds, pension funds, and mutual funds are considered legal persons. Their deposits are furthermore treated as a single deposit within the meaning of paragraph 4 of Article 8 of the law. As such, they fall fully within the repayment mechanism provided for in Article 8. In concrete terms, this mechanism has two components. On the one hand, these entities benefit from a repayment cap set at USD 100,000. On the other hand, the remaining balance of their deposits is converted into asset-backed financial certificates issued by the Banque du Liban, in accordance with the provisions of Article 8 of the law. Through this article, Levant Time has sought to shed light on several grey areas surrounding the GAP Law. Further articles will follow to address additional issues and to provide clear legal and technical answers to the many questions raised by this text among the public.

The proposal to create an economic zone in South Lebanon, mentioned in August 2025 by US envoy Tom Barrack, created a shockwave. The theory behind the project of a “Trump Economic Zone” assumes that such a zone would attract foreign investment, finance reconstruction, thus guaranteeing lasting security. However, several voices have been raised to warn against the danger of undermining the sovereignty of the Lebanese state through the creation of an Israeli-American “protectorate” in the border area. The project of a “Trump Economic Zone” is part of an approach adopted by the current US president to resolve conflicts through economic development and trade. This approach is one of the foundations of liberal thought in international relations. Indeed, the theory of “sweet commerce” is based on the idea that economic exchanges between states constitute a factor of political stability and peace. By forging lasting commercial ties, countries become interdependent, which reduces the incentive to resort to war. This theory was popularized in the 18th century by Montesquieu, “Commerce softens and polishes barbaric customs,” he wrote, emphasizing that economic exchanges transform power relations into cooperative relations. Trump proposed this idea for Gaza, through “Trump Riviera”, as well as in Ukraine, through the transformation of Donbass into a free zone that would benefit Russians as much as Ukrainians. Conditional logic According to Phillip Smyth, an American expert on the Middle East who worked at the Washington Institute and the Atlantic Council, the economic zone goes beyond the simple political framework and is based on an assumed conditional logic. Smyth emphasizes that its implementation requires a high level of organization, planning, and coordination on the ground, essential conditions to reduce risks and attract credible investors. For him, this requirement constitutes a factor of seriousness and viability and not a brake on development. Barrack indicated in August 2025 that Saudi Arabia and Qatar are ready to invest several billion dollars in the economic zone, a statement that was not commented on by those concerned. One thing is certain: these investments remain conditional on certain security guarantees, particularly the disarmament of Hezbollah. Some sources even mention potential investments of up to 10 billion dollars for infrastructure, industrial zones, and job-creating projects. However, these amounts remain to be confirmed by official commitments. According to Smyth, figures do not exist so far. These indications show a real interest in supporting the economic development of southern Lebanon and offering employment opportunities to local populations. Break with the logic of ad hoc aid Southern Lebanon, with a limited formal economic base, could benefit from significant multiplier effects: job creation, infrastructure development, stimulation of trade, and reduced dependence on external aid. The economic zone could thus initiate a dynamic of sustainable reconstruction and progressively restore economic confidence in this fragile region, Smyth affirms. It aims to transform a region long marked by armed conflicts into a structured space, capable of attracting regional and international capital. This initiative seeks to break with the logic of ad hoc aid to favor reconstruction based on long-term investments. The objective of this zone is to further integrate southern Lebanon into regional economic dynamics and to reduce the grip of political logics that have long dominated the local agenda. For Lebanon, the stakes are clear: seize this opportunity to undertake structured and sustainable reconstruction, or let internal blockages, accentuated by Hezbollah's opposition, deprive the south of the country of a development perspective likely, in the long term, to reshape its economic and security future. A state of economic destitution The depth of the Lebanese crisis gives a particular resonance to this project. Since 2019, Lebanon's GDP has contracted by approximately 40%, according to the World Bank. This fall is in addition to a depreciation of the Lebanese pound of more than 98% against the dollar, leading to hyperinflation and a massive loss of purchasing power. In 2022, 44% of the population lived below the poverty line, or nearly 2.6 million people out of a population of approximately 5.8 million. Overall unemployment was estimated at 11.5%, but it exceeds 23.6% among young people aged 15 to 24, particularly affecting the south of the country. This accumulation of financial losses, destruction of infrastructure, and withdrawal of public investment has severely hit this region, highlighting the urgency of structural economic prospects. Political test According to Smyth, Hezbollah's opposition could prevent the project from materializing. This blockage directly affects the region's economic attractiveness by increasing the cost of risk for potential investors. The zone is supposed to modify this equation, by introducing concrete economic interests capable of transforming stability into a shared advantage rather than an externally imposed constraint. The absence of a clearly affirmed Lebanese mandate is both a structural weakness and a revealing sign of the state's limits. Smyth notes that the project acts as a political test for the Lebanese authorities. More active state involvement could transform this external initiative into a national project, strengthen economic governance, and reassert institutional authority in a region largely dominated by parallel logics. Hezbollah's opposition therefore remains the main obstacle. Its armed presence and political weight make it difficult to secure the zone and deter foreign investment. The condition set by Gulf investors — reducing Hezbollah's military influence — underlines how much the project's success will depend on the evolution of the local balance of power and the pro-Iranian militia's willingness to adapt to an economic dynamic that could, in the long term, reduce its influence over the south of the country. Fears On the other side of the border, Israel benefits from the creation of this zone. By transforming the border region into an economic hub, the project could reduce tensions and Hezbollah's military presence and create opportunities for indirect cooperation. Even if the ceasefire monitoring mechanism committee has not yet thoroughly examined the project, these initial consultations suggest that the economic approach could open new channels of dialogue between Beirut and Tel Aviv. Several critical voices point to Israel's supposed desire to establish a security buffer zone, demilitarized and emptied of its inhabitants, on a model comparable to what it would seek to implement along its Syrian and Palestinian borders. Unconfirmed official information thus evokes the creation of large secure perimeters. In Lebanon, these prospects fuel fears of indirect demographic transfer, in which local populations would be progressively displaced in favor of externally managed economic activity. According to these same sources, the central concern lies in the risk that this mechanism would institutionalize lasting forced displacement, as the exodus continues since October 2023, in the absence of any clearly defined strategy for the return of displaced persons and the reconstruction of destroyed villages. For the moment, Trump's project is reduced to a simple declaration, official certainly, but vague and temporary. The importance given to Barrack's statements reflects the country's economic distress and, by the same token, evokes the traditional Lebanese expectation of aid from abroad.

Al-Qard Al-Hassan, formally registered as a charitable association, has increasingly assumed the role of a parallel financial institution in Lebanon since the country’s economic collapse began in late 2019. As the banking sector imploded and depositors lost access to their savings, the organisation stepped into an institutional vacuum. While its services address real needs in a context of state and financial failure, its growing footprint raises serious legal and systemic concerns. Founded during Israel’s 1982 invasion of Lebanon, Al-Qard Al-Hassan was registered in 1987 with the Ministry of Interior as a non-profit association. It remains legally governed by the 1909 Ottoman Law on Associations, which restricts activities to non-commercial, non-profit purposes. Yet in practice, the organisation regularly grants loans and manages gold-backed guarantees—activities that go well beyond its declared legal mandate. Banking functions without a banking licence Al-Qard Al-Hassan primarily provides dollar-denominated loans secured by gold deposits, whose value is assessed in advance with an added risk margin. Since 2020, it has also operated ATMs allowing withdrawals in Lebanese pounds and foreign currencies. These operations fall outside the prudential rules applied to licensed banks and raise questions about compliance with Lebanon’s foreign exchange and currency circulation laws. Under Lebanon’s 1963 Code of Money and Credit, the collection of funds, the granting of credit and the management of payment instruments are reserved exclusively for institutions licensed by the central bank, Banque du Liban. By performing these functions without authorisation, Al-Qard Al-Hassan operates in direct contradiction with the country’s banking legislation. In 2021, Banque du Liban responded by issuing Circular No. 170, banning all Lebanese banks and financial institutions from engaging—directly or indirectly—with Al-Qard Al-Hassan. The circular prohibits account openings, transfers, payment services and any similar transactions. While the measure implicitly acknowledges the organisation’s systemic relevance, it stops short of placing it under formal supervision. As a result, Al-Qard Al-Hassan remains active, but entirely outside the regulatory perimeter. The emergence of “Joud” This legal ambiguity has deepened with the emergence of a new entity, “Joud,” widely seen as a rebranding and structural fragmentation of Al-Qard Al-Hassan’s operations. Registered in 2025 in the Baabda and Nabatiyeh commercial registries, Joud reportedly conducts the same financial activities under a different legal identity. According to available information, the restructuring was designed internally to reduce legal exposure and complicate enforcement efforts. While the name change preserves symbolic continuity, it creates a formal legal break that fragments liability and makes judicial action more difficult. Reports indicate that the new entity’s bank accounts are held at Bank Saderat Iran in Lebanon. No supervision, no depositor protection Banque du Liban holds exclusive authority over monetary and financial regulation, including licensing, oversight and sanctions. These powers, however, do not extend to Al-Qard Al-Hassan or Joud, which are not subject to central bank circulars governing credit, liquidity or foreign currency operations. The absence of licensing also places these entities outside Lebanon’s anti-money laundering and counter-terrorist financing framework. Obligations related to customer due diligence, transaction monitoring and suspicious activity reporting—normally overseen by the Special Investigation Commission—do not apply. A systemic legal failure From a strictly legal perspective, the assessment is clear: Lebanon’s banking monopoly is being bypassed; central bank supervision is absent; the association’s legal status is incompatible with its activities; transparency and anti-money laundering safeguards do not apply; and depositors enjoy no formal protection. This case illustrates how a parallel financial actor can expand rapidly within a fragile institutional environment. It also highlights the urgency of reinforcing Lebanon’s legal and regulatory framework to protect savers and prevent further erosion of the country’s already weakened financial system.

If artificial intelligence supplied the narrative fuel for the extraordinary market performance of 2025, liquidity supplied the oxygen. And while much attention focused on the policies of Western central banks, the most persistent — and ultimately destabilising — source of global liquidity came from elsewhere: Japan. For decades, Japan was treated as an anomaly — an economy trapped in deflation, operating under its own monetary logic and largely disconnected from global cycles. In 2025, that perception proved dangerously outdated. Japan did not merely remain accommodative; it became one of the principal enablers of global risk-taking. For years, the Bank of Japan accumulated trillions of dollars’ worth of bonds and equities on its balance sheet while holding interest rates near zero. Ultra-low Japanese rates and a steadily depreciating yen reignited and expanded the global carry trade. Capital borrowed cheaply in yen flowed into higher-yielding assets worldwide — equities, credit, private markets, and speculative investments — reinforcing risk appetite well beyond Japan’s borders. In effect, Japan exported liquidity to the global financial system at a time when other central banks were attempting, cautiously and inconsistently, to withdraw it. The yen carry trade became one of the most powerful vectors of rising asset prices in 2025, simultaneously driving higher equity valuations and higher leverage across the financial system. But Japan entered 2025 constrained by its own structural realities. With public debt exceeding 235% of GDP, a financial system dependent on ultra-low rates, and a fragile domestic bond market, the return of inflation and the prospect of sustained economic growth forced a strategic shift. In September 2025, the Bank of Japan formalised its decision to stop buying assets and became a net seller of bonds and equities. In December, it raised interest rates again, sending ultra-long bond yields to record highs. The implications were immediate and global: the yen carry trade was placed in grave danger — and, by extension, so were risk assets worldwide. While liquidity continued to inflate financial markets, the real economy was sending a very different signal. Commodities — the most tangible expression of supply, scarcity, and geopolitical tension — surged across the board. Energy, industrial metals, and strategic resources all advanced sharply, reflecting years of underinvestment, supply-chain fragmentation, and the rising costs of deglobalisation. This rise in commodities is not cyclical exuberance; it is structural stress. Unlike financial assets, commodities respond to physical constraints. They price geology, geopolitics, energy intensity, and time. The world entered 2025 with depleted inventories, fragmented supply chains, and intensifying strategic competition over resources — from critical metals to food and energy. In this environment, persistent liquidity collided with limited supply. The implication is critical: inflation risk has not disappeared — it is increasing. Yet markets throughout 2025 largely priced a return to disinflation and policy easing, even as input costs, commodity prices, and strategic resource pressures moved higher. This contradiction — easing financial conditions into rising real-economy constraints — is inherently unstable. It places central banks in an impossible position: tolerate inflation or risk destabilising markets addicted to liquidity. Bond markets may well force that choice in 2026. Japan’s role magnifies this risk. A further weakening of the yen would reinforce inflation through higher import and commodity prices. Conversely, any meaningful appreciation would risk a violent unwinding of carry trades, destabilising global asset prices. Either path carries consequences markets have yet to fully confront. Artificial intelligence and liquidity sustained the rally of 2025. Commodities are now questioning its sustainability. The crypto sphere — the purest expression of speculative excess — has already turned the corner, with Bitcoin down more than 35% from its October peak. History offers few examples in which prolonged monetary distortion, rising leverage, and tightening physical constraints resolve without volatility. The extraordinary trajectory of financial markets in 2025 may ultimately reveal less the birth of a new disruptive era than the excessive optimism that characterises investment bubbles.

No single force shaped the trajectory of financial markets in 2025 more decisively than artificial intelligence. AI became the dominant narrative through which investors justified elevated valuations, extreme concentration, and rising risk-taking. It offered a forward-looking story powerful enough to neutralise concerns about slowing growth, mounting debt, and geopolitical fragmentation. At its core, AI is a genuine technological revolution — a productivity leap comparable to electrification or the internet — and it is already reshaping entire industries. But financial markets do not price long-term societal benefits; they price microeconomic realities: corporate cash flows, capital intensity, and sustainability. It is at this level that a growing disconnect emerged. In 2025, the AI ecosystem was defined far more by capital expenditure than by profits. Training large-scale models, building data centres, securing advanced chips, and powering energy-intensive infrastructure required investment on a scale rarely seen outside heavy industry or national infrastructure programmes. The result was an unprecedented surge in capital spending across hyperscalers and AI platform providers. The explosive rise of NVIDIA — the undisputed hardware backbone of the AI boom — to a valuation approaching $5 trillion reflected not only technological leadership, but also a global investment race. Companies and governments rushed to secure computing capacity, often committing capital well ahead of proven end-user demand. For many, these investments were less about immediate returns than about strategic positioning: buying today to avoid being left behind tomorrow. As the year progressed, markets began to question the sustainability of this investment cycle — and, more importantly, the circular nature of its financing. What remained largely overlooked, however, was the issue of terminal profitability. Valuations increasingly discounted a future of sustained hyper-growth with little regard for return on invested capital or saturation risk. Early data now suggest that only a small fraction of AI ventures will ever reach meaningful profitability, raising the prospect that a significant portion of the roughly $1.5 trillion in planned investments may ultimately be written down. The financial profile of the sector underscored this imbalance. OpenAI, widely viewed as the technological vanguard of the AI revolution, is expected to generate roughly $19 billion in revenue while losing close to $13 billion — a stark illustration of how far monetisation lagged behind investment. In this sense, AI in 2025 functioned less as a conventional growth engine than as a belief system. It allowed investors to rationalise extreme valuations and historic concentration. By year-end, just ten highly overvalued stocks accounted for roughly 45% of the Nasdaq-100’s capitalisation and 34% of the S&P 500 — a precarious configuration should growth expectations fail to materialise.

As Santa prepares to make his annual descent down chimneys around the world and 2025 draws to a close, global financial markets present a picture that would have seemed implausible — if not outright impossible — at the beginning of the year. Most major equity indices are ending the year at, or near, all-time highs, marking a third consecutive year of exceptional performance. In the United States, the benchmark S&P 500 Index is up approximately 17% at the time of writing, following gains of 23% in 2024 and 24% in 2023. This represents a cumulative advance of roughly 77% over three years — and an extraordinary rise of more than 1,000% since the beginning of the secular bull market in March 2009. European markets, despite stagnating growth, political instability, and mounting geopolitical tensions, have followed the same trajectory. Germany’s DAX index is up 22% year-to-date in 2025. The UK’s FTSE 100 has gained nearly 30%, marking one of its strongest annual performances on record. Spain’s IBEX 35 is up an eye-catching 48% so far this year, defying both fiscal constraints and political uncertainty. Japan’s Nikkei 225 continues to levitate at all-time highs, having added 26% in 2025. Chinese equities have also surprised to the upside, with domestic markets up around 17% and Hong Kong-listed stocks up more than 23%. Even emerging markets — long considered the most vulnerable to higher interest rates and tightening global liquidity — have displayed an enthusiasm few anticipated. South Korea’s KOSPI, for instance, is up an astonishing 71% year-to-date. At the same time, assets traditionally perceived as hedges against instability have surged to historic extremes. Gold has decisively broken above levels once thought psychologically and structurally insurmountable, delivering a remarkable 71% gain this year. Silver has outpaced even gold, rising by roughly 149% year-to-date. A broad range of commodities — from energy to industrial metals — have also posted powerful advances, reflecting both speculative fervor and deeper structural tensions. Real estate tells a similar story. In the United States, Japan, and much of Europe, property prices stand at all-time highs, often well above their pre-2007 peaks. These valuations imply an environment of permanently low interest rates and abundant liquidity — an assumption increasingly at odds with reality. In many global cities, prices remain far above pre-pandemic levels, despite higher borrowing costs, declining affordability, and weakening household balance sheets. In short, 2025 has been a banner year for risk-takers, ending with nearly everything expensive — often extraordinarily so. And yet, by most conventional measures, the global economic backdrop has been anything but reassuring. The world has navigated one of the most tense geopolitical environments in decades. Growth has slowed across much of the developed world. Public and private debt levels have reached historic highs. Geopolitical risks have multiplied rather than receded — from the Middle East to Eastern Europe, and from strategic rivalry between major powers to renewed tensions in the Americas. Monetary policy, once the stabilising force of the post-2008 era, has become constrained by political realities and fiscal excess. This is the central paradox of 2025: a year in which financial markets thrived while the underlying economic, political, and social foundations appeared increasingly fragile. This was not a year defined by productivity breakthroughs, broad-based income growth, or a renewed expansion of global trade. Instead, it was a year shaped by liquidity, narratives, and concentration — a year in which capital flowed not toward safety or value, but toward whatever assets appeared most insulated from reality. Everything that should not have worked, worked The extraordinary trajectory of financial markets in 2025 was not an accident. It was the product of collective optimism, technological promise, and renewed hopes of economic renaissance. As economic signals weakened and geopolitical risks intensified, markets did not respond by repricing risk in the traditional sense. Instead, they projected themselves into narratives — the compelling stories of artificial intelligence, of humanoid robotics, and of transformative technologies still largely untested at scale. At the same time, investors anchored themselves to the belief that central banks would ultimately shield markets from meaningful downside, easing monetary conditions whenever stress emerged. This powerful combination of narrative conviction and policy reassurance allowed risk-taking to flourish even as underlying fundamentals deteriorated. Prudence gradually gave way to speculation, as markets became less focused on economic reality and more reliant on expectation and belief. Never in history has retail participation been that high, never in history has concentration in a few stocks been that high, never in history has leverage been that high, never in history have valuations been that high and never in history has the gap between the “Have”s and the “Have Not”s been that extreme. History suggests that such moments signal a transition — from expansion to fragility, from enthusiasm to vulnerability.

Under the effect of American sanctions, restrictions imposed by the Banque du Liban, and losses sustained during the last war with Israel, Hezbollah has sought to reconfigure its main financial arm, Al-Qard Al-Hassan. This “repositioning,” presented as “legal,” aims to preserve its grip on the parallel economy and its social base. Founded in 1982, the Qard Al-Hassan association operates outside the legal banking framework. Iranian funds initially contributed to the association's capital. These were supplemented by Lebanese capital, particularly from entrepreneurs in Africa, over several years. According to the US Treasury Department, which listed Qard Al-Hassan in 2007 on its list of sanctioned entities and then strengthened these sanctions in 2021, this association manages financial volumes comparable to those of a medium-sized bank, while escaping all official supervision. US authorities estimate that the network serves several hundred thousand beneficiaries across Lebanon, relying on significant tangible assets, including gold deposits used as collateral, without control from the Lebanese financial authorities. Since the collapse of the banking system in 2019, Al-Qard Al-Hassan has established itself as a substitute for a sector described as “deeply insolvent” by international institutions, thereby strengthening the economic dependence of Hezbollah's social base and consolidating its financial and political power outside of any state structure. Symbolic legitimacy The policy of severe restrictions imposed since 2019 by the Banque du Liban – limitations on withdrawals, control of transfers abroad, and regulation of exchange operations – has created an environment conducive to the rise of unregulated financial structures. In this context, Al-Qard Al-Hassan has appeared to some as an alternative to the state and the banking sector, due to their failure. The principle of Qard Al-Hassan, based on interest-free loans, gives this association strong symbolic legitimacy within the Shiite community. Hezbollah relies on this reference to present the association as a social work. According to political scientist Ali Hamadé, this symbolism is also strategic for the party's political influence: it has enabled it to penetrate social strata beyond the Shiite community, thus extending its economic and social grip. But in reality, Al-Qard Al-Hassan functions as a parallel banking network, manipulating large amounts of liquidity outside of any state control and beyond the official supervision of the Banque du Liban or the Banking Control Commission. Ali Hamadé notes in this context that the association has entered a phase of so-called "post-liquidation," redistributing certain activities to other Hezbollah-affiliated entities, particularly in the gold sector. Gold purchase, sale, and pawning operations are now carried out via Joud, a commercial company with a tax number and a license, whose general manager from the Karnib family is sanctioned by the United States. Banking-like activities are gradually being transferred to other legal structures, with operations presented as simple sales of goods, thus circumventing financial oversight. The closure would be inevitable Ali Hamadé further emphasizes that the timing of Al-Qard Al-Hassan's closure or control falls under the responsibility of the Presidency of the Republic, not the Ministry of Interior. This responsibility explains the caution in examining the case, particularly with the aim of avoiding financial disruptions for depositors and managing the symbolic impact of such an act on the Shiite community and beyond. Facing international and American pressure, the closure of the association now seems inevitable, even if other structures continue to take over some of its activities. This possible closure has been denied by the association, which states that it "continues to operate under its usual name, in all its branches in Lebanon." It specifies that gold purchase and sale operations, whether cash or installment, are carried out exclusively through legal commercial companies. This clarification illustrates the complexity of the progressive transfer of Al-Qard Al-Hassan's functions to entities like Joud, allowing for a legal distinction between commercial operations and quasi-banking activities.