Escalating Sanctions Disrupt Trade Flows

Intensified US and EU sanctions, including on shipping, oil, and digital assets, severely restrict Iran’s access to global markets. These measures complicate cross-border transactions, increase compliance risks, and force businesses to navigate opaque networks, raising operational and reputational risks.

Accelerated Economic Reform Agenda

Vietnam’s leadership has committed to sweeping economic and administrative reforms, targeting over 10% annual GDP growth through 2030. This includes bureaucratic streamlining, private sector empowerment, and innovation, with significant implications for investment climate and business operations.

High Energy and Tax Costs Undermine Competitiveness

Pakistan’s elevated energy tariffs and tax burdens are driving some multinational companies to exit, while others adapt through local sourcing. These costs, among the highest in the region, erode export competitiveness and deter new foreign investment, complicating business operations.

Digitalization and Regulatory Streamlining Initiatives

The launch of an electronic licensing platform offering 460 services from 41 government entities marks a major step in improving Egypt’s business environment. Faster, more transparent licensing supports ease of doing business and facilitates foreign investment and business expansion.

Surge in Foreign Investment in Germany

Foreign direct investment in Germany more than doubled to €96 billion in 2025, surpassing German outbound investment for the first time since 2003. Political stability, EU market access, and legal certainty make Germany increasingly attractive for international investors, supporting growth and supply chain resilience.

Information Blackouts and Operational Challenges

Authorities have imposed extended internet and communication shutdowns, impeding business operations, financial transactions, and supply chain visibility. These blackouts complicate crisis management, due diligence, and compliance monitoring for international firms.

Infrastructure and Construction Safety Risks

Major infrastructure projects face delays due to safety incidents and regulatory scrutiny, as seen in the recent halting of 14 construction projects after crane accidents. Such disruptions affect supply chains, logistics, and investor confidence in Thailand’s project delivery capacity.

Export Growth Amid Currency and Tariff Risks

Thailand’s exports surged 16.8% in December 2025, but a stronger baht and new U.S. tariffs threaten competitiveness. Export growth is expected to slow in 2026, with ongoing uncertainties around trade policy and global demand affecting business planning.

Geopolitical Risks and Trade Diversification

Turkey faces challenges from shifting global alliances, new EU and India FTAs, and regional tensions. Trade with India declined by over 14% in 2024–25, and exclusion from new FTAs limits market access, highlighting the need for diversified export strategies.

Energy Transition: Nuclear and Renewables

South Korea is advancing its energy transition by planning two new nuclear reactors by 2038 and emphasizing renewables to meet carbon neutrality goals. This shift will influence industrial energy costs, supply chain sustainability, and investment in green technology sectors.

Energy Infrastructure Under Relentless Attack

Russian strikes have caused catastrophic damage to Ukraine’s energy grid, triggering rolling blackouts, heating and water outages, and mass evacuations in major cities. The resulting instability severely disrupts industrial operations, logistics, and daily business continuity, heightening operational risks for all sectors.

Global Supply Chain Diversification Trend

Amid US-led tariff wars, UK businesses are accelerating efforts to diversify suppliers and markets, particularly towards India and Asia-Pacific. This shift aims to mitigate risks from geopolitical shocks and ensure resilience in critical sectors such as automotive and technology.

Resilient Policy Reforms and Governance

Recent reforms include tax simplification, legal modernization, and improved ease of doing business. These measures support startups, MSMEs, and foreign investors, fostering a more transparent, predictable, and growth-oriented business environment that underpins India’s economic ascent.

Disrupted Export Logistics and Supply Chains

Russian attacks on ports and logistics hubs have cut Ukraine’s export earnings by $1 billion in Q1 2026, forcing rerouting via rail and reducing agricultural and industrial exports by up to 47%. Ongoing risks threaten the stability of global supply chains reliant on Ukrainian goods.

Energy Transition and LNG Import Surge

Egypt is rapidly expanding renewable energy projects, signing $1.8 billion in deals with Norway and China. However, domestic gas production decline and regional supply disruptions have turned Egypt into a major LNG importer, raising costs and supply chain complexity.

Energy Transition and Green Ammonia Expansion

Japan is leading Asia in green ammonia co-firing projects and renewable energy investments, targeting decarbonization of power generation. Major projects and international supply agreements position Japan as a regional leader in clean energy, with significant implications for energy-intensive industries and supply chains.

Regulatory Reforms and Business Transparency

Reforms led by the Securities and Exchange Commission of Pakistan have enhanced transparency, digitalized company registration, and aligned regulations with international standards. These measures have improved Pakistan’s global business rankings and investor confidence, supporting easier market entry and compliance.

Energy Transition and Supply Chain Realignment

Finland’s rapid shift away from Russian energy, combined with investments in renewables and thermal storage, is restructuring industrial supply chains. While this enhances energy security and sustainability, it also exposes businesses to volatility in energy prices and regulatory changes.

Infrastructure Modernization and Trade Connectivity

Major infrastructure projects, such as the new semi-automated container terminal at Sokhna Port, are enhancing Egypt’s trade connectivity and logistics capacity. These initiatives are vital for supporting export growth and integrating Egypt into global supply chains.

Climate shocks and heat stress

Flood reconstruction and increasingly severe heat waves reduce labour productivity, strain power systems and threaten agriculture-linked exports. Businesses face higher continuity costs, insurance constraints and site-selection trade-offs, with growing expectations for climate adaptation planning and resilient supply chains.

Labor Market Reforms and Foreign Workforce Growth

Japan’s record 2.57 million foreign workers reflect acute labor shortages, prompting ongoing immigration reforms. Sectors like manufacturing, retail, and healthcare are most affected, influencing workforce planning, operational costs, and the competitive landscape for multinationals.

Massive Public Investment Program 2026

Turkey’s 2026 Investment Program allocates 1.92 trillion TRY to 13,887 projects, prioritizing infrastructure, earthquake resilience, energy, and logistics. This large-scale public spending aims to boost economic growth and supply chain capacity, but also tests fiscal discipline.

Legal Uncertainty and Corruption Risks

Persistent legal unpredictability, high-profile corruption scandals, and slow reforms deter foreign direct investment. Recent parliamentary bribery cases and anti-corruption investigations highlight systemic governance challenges, which international investors view as a greater risk than the ongoing war itself.

EV battery downstream investment surge

Government-backed and foreign-led projects are accelerating integrated battery chains from mining to precursor, cathode, cells and recycling, including a US$7–8bn (Rp117–134tn) 20GW ecosystem. Opportunities are large, but localization, licensing, and offtake qualification requirements are rising.

Mining Sector Under Pressure

Mining output has declined due to falling coal and iron ore production, rising costs, and logistical bottlenecks. Global trade tensions, especially US-China tariffs, further threaten export demand, while structural challenges and job losses persist in this critical sector for foreign exchange and employment.

Mercosur-EU Trade Agreement Reshapes Landscape

The landmark Mercosur-EU agreement, covering over 90% of bilateral trade, will eliminate most tariffs and create one of the world’s largest free trade zones. While it promises a €6 billion GDP boost by 2044 and expanded market access, it also introduces strict regulatory and environmental standards, impacting supply chains, investment, and compliance costs.

Supply Chain Resilience and Diversification

South Korea and the EU are launching a dedicated supply chain dialogue to reduce dependence on specific countries and diversify channels. This initiative, driven by US-China competition, aims to enhance resilience and strategic partnerships, affecting sourcing and logistics decisions for international firms.

Sustainable Development And Regulatory Compliance

Vietnam’s wood and agricultural sectors are adapting to stringent international sustainability and legality standards, especially from the US and EU. Compliance with deforestation-free and traceability requirements is now essential for continued access to major export markets.

Energy transition meets grid constraints

Renewables are growing rapidly, yet Brazil curtailed roughly 20% of wind/solar output in 2025 with estimated losses around BRL 6.5bn, reflecting grid bottlenecks. Investors must factor transmission availability, curtailment clauses and regulatory responses into projects and PPAs.

Critical Uncertainty Over War Settlement

Trilateral talks involving Ukraine, the US, and Russia signal possible movement toward a negotiated end to the conflict. However, the lack of clarity on security guarantees, territorial status, and enforcement mechanisms leaves businesses facing profound uncertainty over the future investment and operating environment.

Afreximbank and Regional Integration

South Africa’s accession to Afreximbank unlocks up to $11 billion in funding for infrastructure, energy, and industrialization. This supports value-added manufacturing, Black business participation, and deeper integration into the African Continental Free Trade Area, enhancing regional trade prospects.

BOJ tightening and yen swings

Rising Japanese government bond yields and intervention speculation are increasing FX and funding volatility. Core inflation stayed above 2% for years and debt is about 230% of GDP, raising hedging costs, repatriation risk, and pricing uncertainty for exporters and importers.

Privatization and State-Owned Enterprise Reform Drive

The government is accelerating privatization of state-owned enterprises (SOEs) to reduce fiscal losses and improve efficiency. Recent sales, including Pakistan International Airlines, signal a shift toward private sector-led growth, but the process faces political, social, and operational challenges.

Technology Sector and Digital Transformation

India’s electronics exports reached Rs 4 lakh crore in 2025, with mobile phone and semiconductor manufacturing surging. Major global tech firms are increasing hiring and offshoring to India, driven by US visa restrictions and cost advantages, signaling a structural shift in global supply chains.

Strategic China-Pakistan Economic Cooperation

China’s commitment of up to $10 billion in new investments, especially in minerals, agriculture, and infrastructure, signals deepening economic ties. Joint ventures under CPEC and technology transfer initiatives are reshaping Pakistan’s resource sectors and supply chain dynamics.

Critical Minerals Strategy Reshapes Trade

Australia's $1.2 billion Critical Minerals Reserve prioritizes antimony, gallium, and rare earths, aiming to secure supply chains and attract investment. This government-backed push is vital for global electronics, defense, and clean energy sectors, impacting international partnerships and supply security.