Mission Grey Daily Brief - October 11, 2024

Summary of the Global Situation for Businesses and Investors

The global situation remains volatile, with rising tensions in the Middle East and Eastern Europe threatening global energy supplies and regional stability. Oil prices have soared 9% since Iran's missile attack on Israel on October 1, with 30% of the global oil supply coming from the Middle East. Western sanctions on Russia have disrupted the diamond trade in India, leading to job losses and financial hardship. In North Korea, the government has announced plans to permanently seal its border with South Korea, escalating tensions on the Korean peninsula. These developments have raised concerns about the impact on the global economy, trade, and consumer spending.

Escalating Tensions in the Middle East

The Middle East is witnessing heightened tensions with Israel and Iran at the forefront. Iran's missile attack on Israel on October 1 has increased the prospect of an all-out war, threatening global energy supplies and regional stability. Richard Doornbosch, President of the Central Bank of Curaçao and Sint Maarten (CBCS), warned that the escalating situation could have far-reaching consequences for the global economy, particularly in relation to oil prices. Experts caution that a full-scale conflict between Israel and Iran could upend the international energy supply and send shockwaves throughout the global economy.

Western Sanctions on Russia and the Diamond Trade in India

Western sanctions on Russia have disrupted the diamond trade in India, particularly in the city of Surat, which has long been a global hub for diamond polishing. The European Union and G7 have banned Russian diamonds, severely impacting the supply of rough diamonds to India's industry. This has led to job losses and financial hardship for thousands of workers in Surat, with factories shutting down or reducing their workforce. The sanctions have wiped out nearly one-third of India's diamond trade revenue, plunging families into financial hardship.

North Korea's Border Closure with South Korea

North Korea has announced plans to permanently seal its border with South Korea, escalating tensions on the Korean peninsula. The North Korean government has stated that the border closure is a self-defensive measure to inhibit war and defend its security. However, analysts remain uncertain about the impact on relations with South Korea, given that travel and exchanges across the border have been suspended for years. The South Korean government has vowed to punish any provocation from the North, further escalating tensions in the region.

The Impact of Middle East Tensions on Global Energy Supplies

The Middle East is a critical hub for global oil supplies, with around 30% of the world's oil supply coming from the region. Escalating tensions between Israel and Iran have raised concerns about the potential disruption to oil and gas exports, which could have a significant impact on the global economy. Experts warn that a full-scale conflict between Israel and Iran could upend the international energy supply and send shockwaves throughout the global economy. Farzan Sabet, senior research associate at the Geneva Graduate Institute, emphasizes that a "major disruption of regional oil and gas exports is likely to have a material impact on the global economy."

Iran has threatened to block the Strait of Hormuz, a strategic waterway through which a fifth of the world's oil supply flows. Neil Quilliam, an energy policy and geopolitics expert at Chatham House, underscores the importance of the Strait of Hormuz to the global economy. Qatar, one of the world's biggest producers of natural gas, also relies on the Strait of Hormuz for its exports.

Sabet predicts that a major disruption to the flow of oil and gas from the Middle East would have an "outsized effect" on the Chinese economy, as Beijing imports an estimated 1.5 million barrels of oil a day from Iran, accounting for 15% of its oil imports from the region. Increased energy prices for China would "filter through the supply chain to the manufactured goods the country exports to the United States, Europe, and other regions."

Sabet believes that even a major disruption to the flow of oil and gas from the Middle East would not cause the global economy to spiral out of control, largely due to the rise of the United States as a major oil and gas supplier and the decreasing global reliance on fossil fuels. However, Western consumers would "feel the price hike at the pump", although it would be "much less than it might have been in a previous era."

Themes around the World:

Industrial relations and project risk

Rising union activity and expanded workplace rights are increasing operational complexity, notably in WA mining where right-of-entry requests rose ~400% in 12 months. Alongside corruption probes in construction unions, investors should price in schedule risk, bargaining costs, and governance diligence.

Geoeconomic diversification toward Gulf

Berlin is accelerating diversification of energy and strategic inputs, courting Qatar/Saudi/UAE for LNG and green ammonia. LNG was ~10% of German gas imports in 2025, ~96% from the US, raising concentration risk. New corridors affect contracting and infrastructure plans.

North America China-evasion enforcement

U.S. officials are pressing partners to curb ‘non-market economy’ leakage into North American supply chains, spotlighting Chinese EVs and components. Companies may face tighter origin verification, audits, and customs enforcement, affecting sourcing strategies for autos, batteries, critical minerals, and electronics.

Reforma tributária e transição IVA

A reforma do consumo cria um IVA dual (CBS/IBS) e muda créditos, alíquotas efetivas e compliance. A transição longa aumenta risco operacional: necessidade de reconfigurar ERPs, pricing e contratos, além de revisar incentivos setoriais e cadeias de fornecimento interestaduais.

Oil exports via shadow fleet

Iran sustains crude exports through opaque “dark fleet” logistics, ship-to-ship transfers, and transponder manipulation, with China absorbing most volumes. Intensifying interdictions and seizures increase freight, insurance, and counterparty risk, threatening sudden disruption for traders, refiners, and shippers.

Shadow fleet disruption and seizures

Western maritime posture is shifting from monitoring to interdiction: boarding, detentions, and potential seizures of falsely flagged tankers are rising. Russia is reflagging vessels to regain protection, but insurers, shipowners, and charterers face higher legal, safety, and reputational risks on Russia-linked routes.

Port infrastructure under sustained strikes

A concentrated wave of Russian attacks on ports and ships—Dec 2–Jan 12 made up ~10% of all such strikes since 2022—targets Ukraine’s export backbone. Damage and interruptions raise demurrage and storage costs, deter carriers, and complicate export contracting for agriculture and metals.

Currency volatility and multiple rates

Exchange‑rate distortions and attempted unification efforts have fueled dollar demand and rial depreciation, amid allegations of delayed oil‑revenue repatriation. This elevates pricing uncertainty, contract renegotiations, and payment risk for importers/exporters, and strengthens grey‑market channels for procurement and settlement.

Iran shadow-fleet enforcement escalation

New U.S. actions target Iranian petrochemical/oil networks—sanctioning entities and dozens of vessels—aiming to raise costs and risks for illicit shipping. This increases maritime compliance burdens, insurance/chartering uncertainty, and potential energy-price volatility affecting global input costs.

Trade controls and dual-use scrutiny

EU anti-circumvention measures increasingly target third-country re-export routes (e.g., machinery, communications equipment) and add more Russian banks and entities. Firms exporting industrial equipment, electronics, or software face stricter end‑use checks, documentation burdens, and elevated penalties for diversion.

Border crossings and movement controls

The limited reopening of Rafah for people—under Israeli security clearance and EU supervision—highlights how border-regime shifts can quickly change labor mobility, humanitarian flows and regional political risk. Businesses should expect sudden permitting changes affecting contractors, travel and project timelines.

High energy costs, gas risk

Germany faces structurally higher industrial power costs and renewed gas-storage risk. Storage levels were ~26–34% in early February and summer prices near winter 2026/27 reduce refill incentives; some sites may close. Energy-intensive production and contracts face volatility.

Digitalização financeira e Pix corporativo

A expansão do Pix e integrações com plataformas de pagamento e logística aceleram liquidação e reduzem fricção no varejo e no B2B, melhorando capital de giro. Ao mesmo tempo, cresce a exigência de controles antifraude, KYC e integração bancária para operações internacionais.

Section 232 national-security tariffs

Section 232 tools remain active beyond steel and aluminum, with investigations spanning pharmaceuticals, semiconductors, critical minerals, aircraft, and more. Even where partner deals grant partial relief, uncertainty around scope and timing complicates long-term supplier selection and U.S. market pricing strategies.

Seguridad logística y robo de carga

Bloqueos, violencia y robo de carga aumentan interrupciones operativas. En 2025, 82% de robos se concentró en Centro (51%) y Bajío (31%); incidentes con violencia predominan. Riesgo: mayores primas de seguro, escoltas, inventarios de seguridad y demoras transfronterizas.

Budget 2026 capex-led growth

Union Budget 2026–27 targets a 4.3% fiscal deficit with ₹12.2 lakh crore capex, prioritizing roads, rail corridors, waterways, and urban zones. Expect improved project pipelines and demand, but also procurement scrutiny and execution risk across states.

Federal shutdown and fiscal brinkmanship

Recurring U.S. fiscal standoffs are disrupting federal services and increasing macro uncertainty. A partial government shutdown began after Congress missed funding deadlines, with estimates of up to $11B GDP loss if prolonged. Impacts include delayed permits, customs/agency backlogs, contractor payment risks, and market volatility.

Energy subsidy and LPG distribution reform

Government plans tighter subsidized LPG 3kg controls: KTP-linked purchases, welfare ‘decile’ targeting, a single-price concept, and a new sub-distributor tier, with pilots before rollout. This affects FMCG demand, retail logistics, inflation dynamics, and operational planning for distributors.

Industrial energy costs and grid build

Industry faces persistently high electricity costs and an estimated ~£80bn transmission-grid expansion to 2031. While network-charge discounts broaden, details remain unclear. Energy-intensive manufacturing may see closures or relocation, affecting supplier bases and UK production economics.

Bilateral trade bargaining approach

The administration is pursuing deal-by-deal leverage—e.g., interim trade frameworks with partners and targeted pressure on Canada. Businesses should expect conditional tariff relief, sector carve-outs, and fast-moving negotiation-driven rule changes that complicate pricing, sourcing, and market-entry decisions.

Ports and logistics hub acceleration

Saudi ports are expanding capacity and private participation to capture transshipment and east–west trade. January throughput reached 738,111 TEUs (+2% YoY) with transshipment +22%. Deals include APM Terminals buying 37.5% of Jeddah’s 4.1m TEU South Container Terminal, plus new logistics centers.

EU partnership on minerals and chips

The EU plans deeper cooperation with Vietnam on critical minerals, semiconductors, and ‘trusted’ 5G, alongside infrastructure investment. Vietnam’s rare earth and gallium potential and its chip packaging base could attract higher-value FDI, but governance, permitting, and technology-transfer constraints remain binding.

EU partnership and EVFTA compliance

The EU upgraded ties to a Comprehensive Strategic Partnership and pushes fuller EVFTA implementation. Exporters face tighter EU requirements on ESG, traceability, safety and carbon rules (e.g., CBAM). Firms should budget for compliance systems, auditing, and cleaner inputs to protect EU access.

Clean-tech investment uncertainty

Major industrial greenfield plans remain volatile as firms reassess EV and battery economics. Stellantis cancelled a subsidized battery plant (over €437m support, up to 2,000 jobs), echoing other paused megaprojects. Investors face policy, demand and permitting uncertainty across clean-tech.

Capacity constraints and inflation breadth

Broad-based price pressures and tight labor conditions suggest capacity constraints across services, construction, and logistics. For multinationals, this can mean wage escalation, contractor shortages, and longer project timelines—especially for large industrial and infrastructure builds.

Taiwan’s US investment guarantees expand

Taipei is backing outbound investment with government credit guarantees, potentially up to $250B, to support semiconductor and ICT supply-chain projects in the US. This lowers financing risk for firms expanding overseas, but may intensify domestic political scrutiny and execution constraints.

Local government debt tightening

Provincial reports signal stricter controls on “hidden” local debt, platform exits, and goals to clear stock by 2026, reinforcing Beijing’s ‘no new implicit debt’ stance. Expect slower infrastructure pipelines, tougher public procurement terms, and heightened scrutiny of SOE financing structures.

Ports capacity crunch and auction delays

Record port throughput (1.40bn tonnes in 2025, +6.1% y/y) is colliding with investment bottlenecks: 17 private terminals stalled since 2013 (R$36.8bn unrealised). Delays and legal disputes around Tecon Santos 10 raise congestion risk for containers and agro-exports.

Sanctions compliance incentives harden

OFSI now states penalties can be reduced up to 30% for self-reporting and cooperation. For online investing firms with cross-border clients, stronger screening, escalation and audit trails become strategic necessities as UK sanctions enforcement intensity rises.

Tax digitization, compliance enforcement

The FBR is expanding nationwide digital monitoring, mandating POS integration across major retail and service categories and broader online registration. This increases auditability but raises near-term compliance costs, data-integration needs and penalties risk—particularly for franchises, hospitality, healthcare and professional services.

Weak growth and deindustrialisation

Germany’s economy remains stuck near 2019 output with private investment down ~11% since 2019 and unemployment above 3 million. Persistent cost, regulation and infrastructure constraints are pressuring manufacturing footprint decisions, supplier stability and demand forecasts.

China exposure and strategic assets

Australia’s China-linked trade and investment exposure remains a top operational risk. Moves to potentially reclaim Darwin Port from a Chinese lessee, alongside AUKUS posture, raise retaliation risk. Western Australia’s iron ore exports to China near A$100bn underline concentration risk for supply and revenues.

Cargo theft and logistics security

Cargo theft remains a material operating risk despite reported declines: industry estimates put 2025 losses above MXN 7 billion, with hotspots in Estado de México and Puebla and key routes like México–Querétaro. High jammer use raises insurance, tracking, and routing costs.

Foreign access to government tenders

Riyadh reversed its 2024 regional-headquarters restriction for public contracts, allowing agencies to award projects to foreign firms without a Saudi RHQ via Etimad exceptions. This widens addressable government demand but adds procedural controls, pricing thresholds and compliance documentation for bidders.

Tariff shocks and legal flux

U.S. tariff policy remains fluid after court challenges and new temporary surcharges, while Mexico imposed 5%–50% tariffs on 1,463 Chinese-linked tariff lines from 2026. Companies face price-pass-through risk, reclassification scrutiny, and a rising premium on documentation and origin strategy.

US tariff and NTB pressure

Washington is threatening to restore 25% tariffs unless Seoul delivers on a $350bn US investment pledge and eases non-tariff barriers (digital rules, agriculture, auto/pharma certification). Policy uncertainty raises pricing, compliance, and sourcing risks for exporters.