Israel after Trump strikes truce with Houthis

Israeli Prime Minister Benjamin Netanyahu has vowed to “defend ourselves alone” against Yemen’s Houthi rebels after the US President Donald Trump struck a deal with the Iran-backed group.

The US deal, announced just hours after the Israeli military carried out major strikes against Yemen’s international airport and other facilities in response to a Houthi attack on Israel’s main airport, was a surprise to Israel, which was not informed in advance about the truce, an Israeli official told CNN.

According to Trump, the US would halt an ongoing military campaign against the Houthis in exchange for the group stopping its attacks on US interests in the region.

The Houthis acknowledged the agreement but made it clear their attacks on Israel would continue. Senior Houthi leader Mohammed Ali al-Houthi said after the announcement that the agreement was “a victory that separates US support for the temporary entity (Israel) and a failure for Netanyahu.”

On Wednesday, Netanyahu said, “Israel will defend itself by itself.” In the past, Israel has carried out joint strikes with the US against the Houthis, but two consecutive days of Israeli attacks on Yemen earlier this week were done alone.

“If others join us—our American friends—all the better. If they don’t, we will still defend ourselves on our own,” he said in a video posted on social media.

Trump referred to the deal as capitulation from the Houthis on Tuesday but on Wednesday he said they had a “good outcome with the Houthis,” adding they had a “great capacity to withstand punishment” from repeated US strikes.

“You could say there’s a lot of bravery there,” Trump said at a swearing-in of his ambassador to China at the White House. “It was amazing what they took.”

He added that the US would “honor their (Houthis’) commitment” not to attack US warships or commercial vessels in the region.

The US-Houthi truce sidelined the Israeli government, according to former US Middle East envoy Dennis Ross. He noted that Netanyahu was left in the dark when the US began talks with Hamas in March and only found out about US nuclear talks with Iran when Trump made the announcement seated next to the prime minister in the Oval Office last month. The US-Houthi ceasefire is one more instance where Israel’s concerns were a tertiary consideration for the White House, if at all, he said.

Whether Houthi ballistic missile launches against Israel continue remains to be seen, but Ross told CNN that Israel does not appear to have been a major factor in the White House’s thought process.

“The Trump Administration thinks about America’s interests,” said Ross.

There has been no public criticism of the White House decision from Israeli officials. Netanyahu, who once openly criticized the Biden administration’s requests and policies, is one of Trump’s most vocal international supporters. Other members of the government have reserved their judgment as well, instead focusing on Israel’s resolve against the Houthis.

Defense Minister Israel Katz said in a statement on Thursday that “Israel must be able to defend itself by itself against any threat and any enemy. This has been true in the face of many past challenges, and it will remain true in the future.”

Trump designated the Houthi group as a Foreign Terrorist Organization in the final days of his first term as president. President Joe Biden revoked that designation early in his presidency in 2021, and Trump designated it again in January.

PSX benchmark index posts 6.08%WoW decline

Pakistan Stock Exchange (PSX) trended negative throughout the week, some recovery was observed during the final trading session. The benchmark index declined by 6,939 points or 6.08%WoW to close at 107,175 level on Friday, May 09 2025.

Notably, Thursday saw the largest single-day decline in the index's history, when the index plunged by 6,482 points or 5.89% amid heightened concerns over regional instability between the two neighboring countries.

On Friday the index recovered 3,648 points or 3.52% on the expectation of the approval of a US$1.0 billion tranche under the first review of the EFF program by the IMF’s Executive Board.

On the macro front, the central bank reduced policy rate by 100 bps to 11%. Workers’ remittances continued their strong trend, rising to US$3.2 billion for April 2025, up 13%YoY).

The budget deficit for 9MFY25 was recorded at PKR3.0 trillion, with the primary balance posting a surplus of PKR3.5 trillion for the same period.

IMF's Executive Board has approved the US$1.0 billion tranche under the first review of the EFF program, alongside approving the new RSF program of US$1.3 billion.

Average daily traded volume was recorded at 508 million shares as compared to 424 million shares a week ago, up 20%WoW).

Foreign exchange reserves held by State Bank of Pakistan (SBP) reserves rose by US$118 million to US$10.3 billion as of May 02, 2025.

Other major news flow during the week included: 1) India cut water supply to Pakistan from Baglihar Dam on Chenab River, 2) Cement sales for April 2025 were recorded at 3.34 million tons, up 8%YoY, 3) S&P Global forecasted more rate cuts in Pakistan, 4) OMC sales in April 2025 increased by 32%YoY, and 5) GoP raised PKR299 billion through PIB auction.

Vanaspati & Allied Industries, Sugar, and Synthetic & Rayon were amongst the top performing sectors, while Transport, Chemical, and Refinery were the laggards.

Major selling was recorded by Mutual Funds and Individuals with a net sell of US$34.9 million. Banks, Companies and other organizations absorbed most of the selling with a net buy of US$31.0 million.

Top performing scrips of the week were: NESTLE, JDWS, IBFL, and MUREB, while laggards included: AGL, SEARL, PTC, and PSX.

According to AKD Securities, market appears to have overreacted to the ongoing escalations, as the development of nuclear capability has significantly reduced the likelihood of full-scale war. The same has been witnessed during escalations since both nations attained nuclear deterrence. During past escalation periods post-nuclear capability, the market has posted an average return of positive 3%. Meanwhile, in 3 months following de-escalation, the market has historically delivered an average return of +5%.

The brokerage house expects the market to rebound with de-escalation of ongoing geopolitical tensions, alongside approval of a US$1.0bn tranche under IMF’s EFF program and US$1.3 billion under new arrangement of RSF.

The brokerage house maintains an ‘Overweight’ stance on Banks, E&Ps, Fertilizer, Cement, OMCs, Autos, Textile, and Technology sectors, as these stand to benefit from monetary easing, structural reforms and reciprocal tariffs.

Can China and Russia end US hegemony?

Ever since Donald Trump has taken over as President of United States, started trade war with China and European allies take custody of Gaza, China and Russia are not only perturbed, but also considering plan to cause dent to the US hegemony in the Middle East and North Africa, to begin with.

We are of the opinion that China and Russia may be serious in ending the US hegemony, but achieving the target is highly unlikely in the near term.

No one can deny that the United States still Holds a strong Position because of:

Military Presence

The US maintains major military bases and alliances in the region (Saudi Arabia, Israel, Qatar, and others).

Energy Security Ties

Despite shifting energy priorities, US influence over global oil markets via relationships with Gulf states remains strong.

Diplomatic Leverage

The US plays a key role in peace negotiations, arms deals, and counterterrorism efforts.

Soft Power

US culture, education, and tech continue to have significant appeal in parts of the region.

Growing Role of China and Russia

China

Economic Influence

China’s Belt and Road Initiative (BRI) has deepened economic ties, particularly through infrastructure investment and oil imports from Gulf states and Iran.

Diplomacy

Recently brokered the Saudi-Iran détente (2023), signaling growing diplomatic credibility.

Non-Interference Model

Appeals to regimes wary of Western pressure on human rights or democratization.

Russia

Military Intervention

Russia has demonstrated staying power in Syria and maintains naval bases in the eastern Mediterranean.

Arms Sales and Security Cooperation

Offers military support without political conditions.

Energy Deals

Competes with and collaborates on energy projects, particularly in gas.

Challenges to Ending US Hegemony

Use of US dollar in international trade

The single largest point that gives the United States unequivocal strength is use of Greenback in international trade and its absolute control over payment and settlement system.

Lack of Unified Strategy

China and Russia do not have a cohesive alliance or unified vision for the region.

Regional Dependence on US

Many MENA states still rely on US military support and arms.

Distrust Toward Russia and China

Some countries remain skeptical of long-term Chinese or Russian motives.

Way Forward

Though, China and Russia are eroding US dominance through economic, diplomatic, and military inroads, but the US retains deep-rooted strategic advantages. A complete end to US hegemony requires a far greater realignment of regional security and political interests.

Unless China and Russia are able to come up with an alternative currency and payment/ settlement system, they just can not cause dent to the US hegemony in any significant manner.

Xi-Putin pledge to stand together against US

Chinese President Xi Jinping told Russia's Vladimir Putin on Thursday their two countries should be "friends of steel", as they pledged to raise cooperation to a new level and "decisively" counter the influence of the United States.

At talks in the Kremlin, the two leaders cast themselves as defenders of a new world order no longer dominated by the US.

In a lengthy joint statement, they said they would deepen relations in all areas, including military ties, and "strengthen coordination in order to decisively counter Washington's course of 'dual containment' of Russia and China.

The two countries said the Ukraine conflict could only be settled by removing its "root causes" - a phrase that Russia has frequently used when arguing that it was forced to go to war to prevent the prospect of Ukraine joining NATO. Ukraine and its Western allies say that was a false pretext for what they call an imperial-style invasion.

Xi is the most powerful of more than two dozen foreign leaders who are visiting Moscow this week to mark Thursday's 80th anniversary of the end of World War Two - a celebration of huge significance for Putin.

Xi's participation - and the joint statement aligning China with Russia's view of the conflict - provide Putin with an important boost as Russia comes under pressure from the United States to end the war.

Russia says it wants to repair relations with Washington, which sank to post-Cold War lows because of the conflict in Ukraine, and that it sees the potential for lucrative business deals. But talks have failed to produce a ceasefire and President Donald Trump has threatened to walk away, unless there is clear progress.

Xi, whose country is currently engaged in a tariff war launched by Trump, said China and Russia should solidify the foundations of their cooperation and "eliminate external interference".

The two countries should "be true friends of steel that have been through a hundred trials by fire", he told Putin.

In another implied reference to the US, Xi said Russia and China would work together to counter "unilateralism and bullying".

Xi and Putin have met dozens of times and signed a "no limits" strategic partnership in February 2022, less than three weeks before Putin sent his army into Ukraine. China is Russia's biggest trading partner and has thrown Moscow an economic lifeline that has helped it navigate Western sanctions.

 

Asia takes step to move away from US dollar?

Asia’s largest economies made a decision that could signal a shift away from the US dollar on Sunday, as they approved a new rapid financing mechanism that will for the first time use regional currencies including the Chinese yuan.

The new scheme has been rapidly approved as countries across East and Southeast Asia look to shield themselves from the financial volatility unleashed by US President Donald Trump’s global tariff war, which has triggered turbulence in the US Treasuries market and an Asian currency rally in recent days.

It may also herald a deeper, longer-term shift towards a regional monetary mechanism that is less reliant on the dollar – and gives China a bigger role.

In this explainer, the South China Morning Post breaks down the details of the new financing mechanism, and what it means for the future of Asia and the dollar-based global financial system.

What is behind this decision?

The new rapid financing mechanism is part of a broader scheme known as the Chiang Mai Initiative Multilateralization (CMIM) – a currency swap arrangement among the 10-member Association of Southeast Asian Nations (Asean), China, Japan and South Korean.

The CMIM has its origins in the aftermath of the Asian Financial Crisis of the 1990s. It is designed to prevent a repeat of that crisis by providing emergency help to countries facing balance-of-payments issues and short-term liquidity difficulties.

The 13 member countries – collectively known as Asean+3 – first began setting up a network of bilateral currency swap arrangements in 2000, then the scheme expanded and evolved into the CMIM a decade later.

The lending capacity of the CMIM has since risen the US$240 billion, with Japan and China each contributing US$76.8 billion, South Korea US$38.4 billion and the 10 Asean countries a combined US$48 billion, according to the Asean+3 Macroeconomic Research Office.

To date, none of the member countries have ever requested CMIM funding.

What was decided on Sunday?

During a meeting of finance ministers and central bank governors from the Asean+3 nations in Milan, Italy, on Sunday, the attendees approved a new tool for providing swift financial help to economies facing urgent balance-of-payments issues called the CMIM Rapid Financing Facility.

Unlike previous mechanisms, which relied on the US dollar, the new facility will use the Chinese yuan and other regional currencies.

The yuan had been approved for use as a transaction currency in the CMIM pool just weeks earlier, during a meeting of the Asean+3 deputy finance ministers and central bank governors in April.

A joint statement released at the Milan meeting noted that the new facility was designed to “enhance regional resilience by offering members timely access to emergency financing during urgent balance of payments needs, in response to sudden exogenous shocks such as pandemics and natural disasters”.

In a press release published on Monday, China’s central bank governor Pan Gongsheng hailed the move as “a breakthrough in diversifying the international monetary system in the region” amid a period of global uncertainty.

In Milan, the financial officials also agreed to explore further improvements to the CMIM in line with the International Monetary Fund framework – a move seen as a step towards institutionalizing the initiative and making it more effective.

What it means for the US dollar?

“Yuan’s inclusion in the CMIM system reflects growing acceptance of the currency on the global stage and marks a step forward in its internationalization,” said Ding Shuang, chief Greater China economist at Standard Chartered Bank.

The move comes as Beijing accelerates its efforts to expand the yuan’s global influence by encouraging the use of the Chinese currency in trade settlement, commodity pricing and foreign exchange reserves.

Chinese authorities have also tried to boost cross-border use of its digital yuan through Project mBridge, a scheme launched in collaboration with the central banks of Hong Kong, Thailand, Saudi Arabia and the United Arab Emirates.

Ding, however, noted that the significance of the yuan’s inclusion in the CMIM was mainly symbolic, given that the mechanism has never before been activated and the member countries already had sufficient foreign exchange reserves.

“At this stage, the inclusion of the yuan is more of a structural move, and we will only see the actual impact when the CMIM funding pool is truly activated,” said Ding.

 

Saudi Arabia denounces Israeli move to occupy Gaza

The Ministry of Foreign Affairs expressed Saudi Arabia’s categorical rejection of the Israeli occupation authorities’ announcement regarding their incursion into and control of the Gaza Strip and Palestinian territories.

The ministry also strongly condemned the continued Israeli violations of international law and international humanitarian law.

Saudi Arabia reaffirmed its firm stance against any attempts to expand Israeli settlements in the occupied Palestinian territories and stressed the importance of holding the occupation authorities accountable to implement international resolutions.

The ministry reiterated Saudi Arabia's unwavering support for the Palestinian cause, in line with international legitimacy, the Arab Peace Initiative, and the establishment of an independent Palestinian state on the 1967 borders, with east Jerusalem as its capital.

Oman mediates US-Yemen ceasefire

In a statement late on Tuesday night, Oman announced it had conducted “recent discussions and contacts” with the United States and “relevant authorities” in the Ansarallah-controlled Yemen. The “efforts have resulted in a ceasefire agreement between the two sides,” it said, Al Jazeera reported.

“In the future neither will target the other, including American vessels, in the Red Sea and Bab al-Mandab Strait, ensuring freedom of navigation and smooth flow of international commercial shipping,” the statement said.

US Present Donald said, “The Houthis have announced that they don’t want to fight any more.”

“They just don’t want to fight. And we will honor that, and we will – we will stop the bombings, and they have capitulated, but more importantly, we will take their word. They say they will not be blowing up ships anymore,” he said.

“We just found out about that. So I think that’s very, very positive. … I will accept their word, and we are going to stop the bombing of the booties, effective immediately,” he said.

Trump also said he’ll make a major announcement before his trip to the Middle East either on Thursday or Friday.

“It’ll be one of the most important announcements that have been made in many years about a certain subject, very important subject,” he said at the White House. He did not elaborate.

Trump is to visit Saudi Arabia, Qatar and the United Arab Emirates starting on May 13.