Inflation Risks From Oil

Middle East tensions are feeding directly into South Africa’s fuel, transport and input costs. Brent crude rose from $69.08 to $93.67 per barrel during the review period, lifting inflation risks, threatening rate hikes, and pressuring import-dependent supply chains and consumer demand.

Reindustrialisation and tariff debate

Calls for broader tariffs on Chinese imports and a tougher review of the China-Australia trade framework signal growing pressure for industrial policy. Even without immediate policy change, companies should monitor rising risks of protectionism, localization incentives, and sector-specific import restrictions.

Power Security and Energy Bottlenecks

Electricity and fuel security has become a top policy priority as generation capacity remains below plan, key pricing mechanisms are unfinished, and firms report shortage risks. Energy volatility is raising operating costs, threatening manufacturing continuity, and reshaping investment decisions in energy-intensive sectors.

China Access Expands Export Optionality

Zero-tariff access to China from 1 May under the China–Africa Economic Partnership Agreement opens a vast new market and may attract manufacturing investment. However, firms still face compliance, distribution and logistics hurdles before tariff relief translates into scalable commercial gains.

Fragmented Payment Settlement Channels

Banking restrictions are pushing Iran-related trade into non-dollar channels, including yuan settlement through offshore branches and third-country intermediaries. This increases transaction complexity, AML scrutiny, documentation burdens, counterparty risk, and the chance of delayed or blocked payments for cross-border business.

South China Sea shipping tensions

Renewed friction in the South China Sea, including tighter Chinese control around disputed shoals, increases operational risk for maritime trade. Even without major conflict, insurers, shippers, and investors face elevated contingency costs, route uncertainty, and geopolitical risk premiums.

Energy Import Vulnerability Exposed

Taiwan imports nearly 96% of its energy, with over 70% of crude oil sourced from the Middle East and roughly one-third of LNG from Qatar. Recent petrochemical disruptions and price spikes underline operational exposure for manufacturers, logistics operators, and energy-intensive exporters.

Manufacturing Relocation and Cost Shock

Recent U.S. tariff rule changes now apply duties to the full value of many metal-containing products, sharply raising exporter costs. Firms report cancelled orders, layoffs, and possible relocation to the United States, with BRP alone warning of more than $500 million impact.

Clean Energy Export Leverage

China is considering curbs on advanced solar manufacturing equipment exports and already tightened controls on some battery technologies and materials. Given China’s dominance in solar components and battery supply chains, these steps could reshape clean-energy sourcing, capex planning, and project timelines.

Sanctioned LNG Discounts Distort

Russia is offering LNG from sanctioned projects such as Arctic LNG 2 and Portovaya at discounts of about 40% to spot prices. This creates opportunistic buying incentives for Asian importers while exposing traders, terminals and financiers to secondary-sanctions and traceability risks.

Construction labor and housing delays

Post-October 2023 restrictions on Palestinian labor left construction short of workers, with officials citing failure to bring in up to 100,000 replacements quickly enough. Delays are slowing housing delivery, raising project risk and pressuring infrastructure-related supply chains.

Fiscal Credibility Clouds Investment Outlook

Fitch shifted Indonesia’s outlook to negative, citing weaker policy credibility, subsidy pressures and possible off-budget spending. With the 2026 deficit baseline at 2.9% of GDP and rupiah pressure persisting, investors face higher macro, financing and policy predictability risks.

Digital Infrastructure Investment Accelerates

Indonesia is positioning itself as a regional AI and data-center hub through localization pressure, lower land and power costs, and major commitments from Microsoft, DAMAC, and Indosat-NVIDIA. Opportunity is significant, but reliable clean power, water, and governance remain decisive constraints.

Border Bottlenecks Raise Costs

Land trade with the EU still faces costly friction at border crossings. Nearly half of surveyed firms cite queues as the top customs problem, average clearance time rose to 6.9 hours, infrastructure constraints remain acute, and repairs at key Poland crossings risk adding further delays.

External Financing And Reforms

Ukraine’s budget, macro stability, and business confidence remain tied to IMF, EU, and World Bank funding. A €90 billion EU package and IMF flexibility help, but delayed reforms, tax changes, and parliamentary bottlenecks still create policy uncertainty for investors.

Energy insecurity and cost volatility

Germany still imports about 70% of its energy and gas storage was only 21.9% full in early April. A planned strategic gas reserve of 24 TWh highlights persistent exposure to LNG disruption, high input costs, and industrial competitiveness risks.

Cross-Strait Blockade Risk Escalates

Chinese military and coast guard activity around Taiwan has risen to nearly 100 vessels, while Taipei is running anti-blockade drills. Even limited inspections or exclusion zones could disrupt shipping, raise insurance costs, delay cargo, and destabilize regional supply chains.

Fiscal Extraction from Business

Moscow is considering new windfall levies on commodity producers and banks after a similar 2023 tax raised 318.8 billion rubles, highlighting rising fiscal pressure on profitable sectors and increasing policy unpredictability for investors, lenders and joint-venture partners.

US Trade Tensions Escalate

South Africa faces growing trade uncertainty with the United States as Washington expands tariff-based pressure and investigates alleged unfair trade practices under Section 301. Additional tariffs or fees would threaten export-oriented sectors, especially metals, autos, and firms relying on preferential market access.

Oil Revenues Remain Resilient

Despite G7 price-cap measures, Russia’s fossil-fuel export revenues rebounded strongly as Urals crude reportedly reached $94.5 per barrel in March and monthly export revenues rose 52%. Elevated energy earnings strengthen state finances, complicating sanctions strategy and sustaining external trade leverage.

Digital Trade Regulatory Expansion

Digital trade is now embedded in India’s major trade negotiations, including current US discussions covering market access, customs, investment promotion and digital rules. For international firms, evolving requirements around data governance, platform operations and cross-border digital flows will shape compliance costs.

Fuel security drives policy

Australia’s heavy reliance on imported refined fuels has sharpened energy-security policy amid Middle East disruption. New arrangements with Singapore and expanded government powers over fuel stockpiling increase resilience, but sustained supply shocks could still raise operating costs, freight rates, and industrial input prices.

Industrial Licensing Rules Easing

Authorities are considering reforms to simplify industrial licensing, reduce fees, and ease compliance burdens, including wider payment cycles and clearer land-use rules. If implemented effectively, these changes could improve manufacturing timelines, project execution, and Egypt’s competitiveness for new plants.

Tax, Labour and Social Cost Reforms

A 2027 income-tax reform for lower and middle earners is planned, alongside debates over higher taxes on top earners, labour-market changes and social spending restraint. Potential shifts in payroll burdens, retirement rules and household demand will affect cost structures and consumption.

Customs Modernization Border Frictions

Customs reforms are improving transparency, but border queues, weak crossing infrastructure, and longer clearance times still disrupt supply chains. Customs generated 22% of Q1 budget revenue, while average clearance rose to 6.9 hours and contraband increased to 17%.

Judicial Reform Investment Uncertainty

Mexico’s judge-election reform is raising concerns in Washington and among investors over judicial independence, technical quality, and vulnerability to cartel influence. Weaker legal certainty could affect contract enforcement, dispute resolution, and risk pricing for long-term foreign direct investment.

Monetary Policy and Inflation Uncertainty

The Bank of England held rates at 3.75%, but inflation is projected to reach 3.5% in Q3 2026 as businesses expect 3.7% price increases over the next year. This creates uncertainty for financing costs, consumer demand, capital expenditure and foreign investment timing.

Financial Regulation Competitiveness Questions

The UK’s appeal as a financial hub faces scrutiny as banking licence applications fell to zero in 2025 from 11 in 2020. Perceived regulatory complexity may deter foreign entrants, potentially limiting fintech expansion, cross-border capital formation and broader services-sector investment momentum.

Export Competitiveness Under Cost Pressure

Rising energy, transport, and financing costs are squeezing Turkish exporters even as exchange-rate management limits abrupt currency adjustment. Businesses using Turkey as a production base should watch margin compression, supplier renegotiations, and sector-specific resilience in price-sensitive industries.

Activist Investors Gain Influence

Activist funds are expanding in Japan, supported by governance reform and exchange pressure on capital efficiency. Record campaign activity is increasing pressure for restructurings, divestments, buybacks, and management changes, creating both transaction opportunities and execution risks for investors and counterparties.

Black Sea Corridor Remains Vital

Despite attacks roughly every five days, Ukrainian ports handled over 21 million tonnes in Q1 and met 98% of targets. The maritime corridor has moved more than 190 million tonnes since 2023, making it essential for exports, shipping revenues, and supply-chain resilience.

Defense Build-Up Reshapes Industry

France is sharply increasing defense outlays, with an extra €36 billion planned for 2026-2030 and spending aimed at 2.5% of GDP by 2030. This supports aerospace, electronics and advanced manufacturing, but may crowd budgets and intensify competition for skilled labor.

Vision 2030 project recalibration

War-related losses exceeding $10 billion and weaker investment sentiment are forcing reviews of flagship projects including Neom and Sindalah. For foreign investors, this raises reprioritization risk, delayed procurement, altered financing structures, and more selective state backing for mega-project participation.

Data Centre and AI Infrastructure Boom

Large-scale digital infrastructure is emerging as a new investment theme, led by Bell Canada’s planned 300-megawatt Saskatchewan AI data centre with a reported $12 billion commitment. These projects will boost demand for power, land, cooling infrastructure, and local regulatory compliance.

Labor Regulation Cost Pressure

Brazil’s policy debate on working-time and labor protections is raising concern over future operating costs, especially in services, retail, and platform-based sectors. Even before reform, wage pressures and labor-market tightness are contributing to sticky services inflation and compliance risk.

Hormuz Transit Control Risk

Iran’s selective control of the Strait of Hormuz is the dominant business risk, with daily ship movements reportedly down about 90-95% from normal levels, raising freight, insurance and inventory costs across oil, LNG, chemicals and containerized trade.