(Bloomberg) -- The Middle East's balance of power has just been disrupted by one of the biggest diplomatic shocks in years.
Overnight, an alliance led by Saudi Arabia severed commercial and diplomatic ties with Qatar. It was an unprecedented move designed to punish the Gulf state for its ties with Iran, the Muslim Brotherhood and other Islamist groups.
Qatar may be tiny -- about half the size of New Jersey -- but it's a financial superpower. The country is the world's biggest producer of liquefied gas and, through its $335 billion sovereign wealth fund, owns stakes in companies from Barclays to Russian oil giant Rosneft.
The move also poses a dilemma for the Trump administration. Qatar and Saudi Arabia are both American allies, as are Saudi's partners -- Egypt, Bahrain and the UAE. Qatar is also home to the U.S. military’s Mideast command center. Secretary of State Rex Tillerson urged all parties to resolve their differences.
It's not entirely clear what Saudi wants. But it's a fair bet that it expects Qatar to come to heel over Iran and join its campaign to isolate the Islamic Republic. If Qatar resists, it will only add to the region's instability.
Terrorism upends Britain's election | Thursday's vote was supposed to decide who is best placed to negotiate a good Brexit deal with Europe. But it has descended into acrimony after two terrorist strikes in as many weeks. The opposition Labour Party accused Prime Minister Theresa May of playing politics when she unveiled new proposals to tackle extremism within hours of Saturday night's attack. May's team countered that Labour's Jeremy Corbyn is too soft on terrorism.
London tweets anger Brits and Democrats | The president seized on the London attacks to settle scores and promote his own agenda in a series of tweets that drew fire from U.K. leaders. But the tirade won't distract from growing concerns about his campaign's ties to Russia, a subject that will be thrust back into the spotlight when fired FBI Director James Comey testifies Thursday on Capitol Hill.
Mexico's establishment holds on | President Enrique Pena Nieto's party looks set to hold off a populist challenge to retain control of the country's most populous state. With most votes counted, his candidate leads by about 2 percentage points, signaling a victory that will help shore up the ruling PRI's position ahead of presidential elections next year.
Asia losing faith in America | U.S. Defense Secretary James Mattis's robust defense of the “rules-based order” at Asia's biggest security conference over the weekend did little to ease concerns that his boss intends to unravel it. The reception showed it's getting harder to sell Trump to the world as he acts on his “America First” campaign pledges.
Trump's air-traffic privatization | The president today will propose selling off the U.S. air-traffic control system, the start of a week-long push for his $1 trillion infrastructure initiative. With state and city leaders from both parties concerned they’d shoulder too much of the financial burden, Trump will hit the road to rally support for his plan.
Macron trolls Trump | First there was that bone-crunching handshake, then a tweet mocking Trump's campaign slogan. And on Friday the French government's parody of a White House climate video was viewed more than 11 million times. Emmanuel Macron's hazing of the U.S. president plays well at home ahead of legislative elections this month. But, as Gregory Viscusi and Margaret Talev write, there are risks in provoking the U.S. president.
And finally... A primer on Qatar. The tiny Gulf state is one of the richest countries on the planet, sharing the world's biggest natural gas field and buying up some of the globe's most prized trophy assets, including `The Shard,' the most iconic London skyscraper of modern times. It also has holdings in everything from Hollywood to Italian fashion and is even bankrolling soccer's 2022 World Cup. The problem, its critics say, is that its money also foments unrest across the region, funding the Muslim Brotherhood as well as Hamas.