Geopolitical Risks from Iran and Russia

The UK faces heightened physical security threats from Iran, now comparable to those from Russia, including assassination attempts and espionage. Sanctions targeting Russian military and chemical weapons actors continue amid the Ukraine conflict. These geopolitical tensions impact UK national security, foreign policy, and may influence investor risk assessments and international business operations.

Geopolitical Instability Impacting Trade Routes

The Middle East conflict risks blocking vital maritime routes like the Strait of Hormuz, disrupting global shipping lanes essential for France’s imports of raw materials, electronics, and consumer goods. Increased insurance premiums and shipping costs could strain French supply chains and raise operational expenses for businesses reliant on uninterrupted trade flows.

Fiscal and Debt Challenges

Brazil faces significant fiscal strains with a rising public debt projected at 92% of GDP in 2025, driven notably by state-level debts. The federal government’s deficit and stalled fiscal consolidation, combined with political resistance to reforms and tax hikes, create uncertainty for investors and risk higher borrowing costs, impacting economic stability and growth prospects.

Escalating Tariff Policies and Trade Wars

The Trump administration's aggressive tariff hikes, including 10% to 50% tariffs on imports from key partners like China, EU, Mexico, Brazil, and BRICS-aligned countries, are creating significant uncertainty and volatility in global markets. These tariffs disrupt supply chains, increase costs for U.S. businesses and consumers, and risk triggering global recession and retaliatory trade wars, undermining international trade stability.

Critical Infrastructure Vulnerability

Russian missile and drone strikes target Ukraine’s energy, transport, and port infrastructure, causing repeated damage and operational disruptions. Attacks on hospitals, power lines, and logistics hubs increase reconstruction costs and threaten supply chain reliability. The vulnerability of critical infrastructure remains a top concern for businesses and investors, necessitating enhanced defense and resilience measures.

Australia-China Trade Relations

Australia's economic ties with China remain paramount, with two-way trade valued at $312 billion in 2024. The relationship is marked by efforts to normalise post-pandemic tensions, focusing on expanding trade in iron ore, green steel, education, and emerging sectors like AI and clean energy. However, geopolitical and security concerns, including military assertiveness and port lease disputes, complicate cooperation.

U.S.-China Trade Tensions

Renewed U.S. tariffs on Chinese goods and China's threats of retaliation exacerbate global supply chain disruptions. Indonesia faces risks from diverted Chinese exports flooding its markets, prompting planned antidumping measures to protect domestic industries, especially steel, aluminum, textiles, and footwear, amid weakening manufacturing performance and uncertain global trade policies.

Strengthening Egypt-Pakistan Economic Ties

Egypt and Pakistan are expanding bilateral cooperation in trade, defense, and investment, with current trade at $300 million. Opportunities exist in textiles, agriculture, IT, and manufacturing, leveraging Egypt’s strategic location and economic zones. This partnership could enhance regional supply chains and attract foreign direct investment, benefiting sectors like automotive and sports goods manufacturing.

Trade Policy and Tariff Manipulations

Recent federal budget measures introduced preferential tariff treatments benefiting select domestic firms, notably in the printing and packaging sector, distorting market competition. Anti-dumping duties on imports and inconsistent customs classifications raise costs for thousands of businesses, undermining fair competition, export competitiveness, and investor trust in Pakistan's trade policy framework.

Climate Change Adaptation Costs

Canadian businesses face rising costs adapting to climate change, with sectors like utilities, insurance, and industrial services most affected. Investments in resilience infrastructure, such as floodways and buried power lines, are critical but underfunded. Public funding dominates adaptation spending, with gaps in financing especially acute in developing countries. This trend influences supply chain risk management, insurance products, and investment in sustainable infrastructure.

Supply Chain Resilience and Rare Earth Ambitions

Japan is actively pursuing rare earth element production to reduce dependence on China amid global supply constraints. This strategic move aims to secure critical materials for high-tech industries, enhancing supply chain resilience. However, ongoing geopolitical tensions and limited global supply pose challenges, influencing international trade dynamics and investment in resource-related sectors.

Agricultural Land Contamination and Demining

Ukraine's agricultural sector faces severe challenges from extensive landmines and unexploded ordnance contaminating fertile farmland, reducing usable land from 32 to 24 million hectares. Demining efforts are largely grassroots and under-resourced, with farmers often clearing mines themselves. This contamination threatens food production, export potential, and rural economic stability, requiring significant international support and technological innovation.

Cultural and Religious Social Dynamics

Religious commemorations and cultural events, such as Ashura and related ceremonies, play a vital role in social cohesion and national identity. These dynamics influence domestic stability and public sentiment, indirectly affecting the business climate by shaping societal resilience and government legitimacy amid external pressures.

Renewable Energy Infrastructure Bottlenecks

Brazil’s rapid wind and solar energy expansion faces critical grid transmission constraints causing production curtailments and financial losses exceeding $211 million. Regulatory changes reducing compensation for curtailed renewable energy further discourage investment, threatening Brazil’s clean energy transition and energy sector stability.

Green Finance and Climate Resilience Initiatives

Pakistan is advancing green banking policies under State Bank directives, promoting environmental risk management and green finance products like renewable energy refinancing and green bonds. IMF support under the Resilience and Sustainability Facility underscores the urgency of climate adaptation. These initiatives aim to build economic resilience against climate disasters, attract sustainable investment, and align financial sector practices with environmental goals.

China's Financial Sector Opening

The launch of the Mainland China-Hong Kong Payment Connect scheme exemplifies Beijing's efforts to open its financial sector and enhance cross-border capital flows. Leveraging Hong Kong's financial infrastructure aims to integrate China more deeply into global markets, facilitating investment and trade financing, and signaling gradual liberalization despite broader geopolitical tensions.

Geopolitical Risks from Ukraine Conflict

Ongoing US-Ukraine defense cooperation and partial US arms supply disruptions highlight geopolitical volatility affecting Germany. The conflict’s regional instability influences supply chains, energy security, and investment risk assessments. Germany’s role in diplomatic efforts and economic support to Ukraine underscores its exposure to Eastern European security dynamics impacting international business operations.

Climate Risks as Systemic Economic Threat

The Bank of Russia identifies physical and transition climate risks as systemic threats to the economy and financial sector, warning that without proactive measures, one-third of companies may face financial difficulties by the mid-2030s. However, climate-related opportunities exist, including rising demand for critical minerals and nuclear energy development, positioning climate agenda as a catalyst for economic modernization.

Escalating U.S. Tariff Regime

The Trump administration's aggressive tariff policies, including threats of tariffs up to 70% and additional 10% tariffs on BRICS-aligned countries, are creating significant uncertainty in global trade. These measures disrupt supply chains, increase costs for U.S. businesses and consumers, and risk retaliatory tariffs, impacting investment strategies and international economic relations.

Shekel Appreciation and Currency Dynamics

The Israeli shekel has strengthened significantly against major currencies, driven by improved geopolitical conditions and investor confidence. This appreciation reduces import costs and inflationary pressures but may challenge export competitiveness. Currency stability also influences cross-border trade, investment flows, and multinational corporate strategies operating in Israel.

Corporate Governance and Business Security

Violent disputes over corporate control, exemplified by the armed takeover attempts of a major sand mining company, expose weaknesses in corporate governance and legal enforcement. This environment of intimidation and criminal interference threatens business stability, deters investment, and complicates supply chain operations in resource extraction sectors.

Western Sanctions and Economic Resilience

Western sanctions targeting Russia since 2022 have aimed to isolate its economy, restricting access to financial systems like SWIFT and imposing trade barriers. Despite this, Russia has demonstrated resilience with GDP growth of 4.1% in 2023 and 4.3% in 2024, driven by diversified trade partnerships and adaptation strategies, though investment activity and credit affordability are declining, signaling potential economic cooling.

US Sanctions on Mexican Banks

The US Treasury sanctioned three Mexican financial institutions (CIBanco, Intercam, Vector) for alleged money laundering linked to drug cartels, disrupting their access to US financial systems. Mexico's government intervened these banks to protect clients, while denying evidence. This escalates US-Mexico financial tensions, risks investor confidence, and complicates cross-border banking and compliance frameworks.

Religious and Cultural Cohesion

Massive public participation in religious commemorations like Ashura and Muharram rituals reflects deep societal cohesion and cultural identity. This unity can stabilize internal social dynamics but also reinforces ideological frameworks that influence governance and economic policies.

US Pressure on Mexico’s Anti-Corruption Efforts

The US government is intensifying demands for Mexico to extradite politicians with alleged cartel ties, threatening economic sanctions. This escalates diplomatic tensions and highlights governance challenges, potentially affecting Mexico’s political stability and investor confidence in regulatory and legal frameworks.

China-India Tech and Manufacturing Tensions

China's recall of engineers and export curbs on machinery to Indian electronics firms, notably Foxconn, disrupt India's manufacturing ecosystem. This hampers expansion plans, raises costs for smaller firms reliant on Chinese equipment, and challenges India's ambition to scale domestic electronics production. India is actively seeking alternatives through Taiwan, South Korea, and domestic capacity building to mitigate these geopolitical pressures.

Public Trust Deficit in Institutions

Surveys reveal widespread distrust in Turkish institutions, with 25% of respondents expressing no confidence in any public body. This erosion of institutional trust exacerbates social instability, complicates policy implementation, and increases reputational risks for businesses reliant on stable governance and regulatory environments.

US-Mexico Financial Sanctions Impact

The US Treasury sanctioned three major Mexican financial institutions (CIBanco, Intercam, Vector) for alleged money laundering linked to drug cartels, disrupting cross-border financial transactions. This has led to Mexican government intervention in these banks to protect clients, raising concerns about financial system stability, regulatory compliance, and investor confidence in Mexico's banking sector.

China-Iran Strategic Economic Ties

China's deepening economic partnership with Iran, including a $400 billion 25-year cooperation agreement and the new China-Iran rail corridor, enhances China's Belt and Road Initiative reach. However, ongoing Middle East conflicts and US sanctions pose significant risks to trade routes, energy security, and supply chain stability, impacting China's global trade and investment strategies.

Labor Market Challenges and Workforce Uncertainty

China faces significant employment challenges with rising youth unemployment and widespread wage stagnation across sectors. Layoffs, pay cuts, and reduced job security affect both white- and blue-collar workers, dampening consumer confidence and domestic demand, which may slow economic rebalancing efforts and impact supply chains reliant on stable labor markets.

Antidumping Measures on Chinese Imports

Indonesia plans to implement antidumping and safeguard policies to curb the influx of Chinese imports, particularly steel, aluminum, textiles, and footwear. This response is driven by China's potential export redirection due to US tariffs and risks to domestic manufacturing sectors. The measures aim to protect local industries amid a contracting manufacturing PMI and global trade uncertainties, affecting supply chains and industrial competitiveness.

National Security and Geopolitical Risks

The UK faces escalating security threats including nuclear proliferation, cyberattacks, terrorism, and potential wartime scenarios on home soil. Heightened tensions involving Russia, Iran, and China, alongside conflicts in Ukraine and the Middle East, pose risks to energy security, supply chains, and economic stability, prompting the government to enhance defense spending and national security strategies.

Nuclear Program and International Oversight

Iran’s decision to bar IAEA Director General and surveillance cameras from nuclear sites following data leaks reflects heightened tensions over nuclear transparency. This move challenges international nuclear non-proliferation frameworks, increases geopolitical uncertainty, and may trigger further sanctions or diplomatic isolation, affecting Iran’s international trade relations and foreign investment climate.

Internal Political Dynamics and National Unity

Debates within Iran's political elite, including criticism of presidential remarks and emphasis on national unity, reflect internal tensions that could influence policy consistency. Maintaining social cohesion is critical for sustaining economic stability and investor confidence amid external pressures and sanctions.

Inflation Trends and Monetary Policy Challenges

Brazil’s inflation slowed to 0.26% monthly in June 2025 but remains above target at 5.27% annually. Rising housing and electricity costs strain households, especially low-income groups. The Central Bank maintains a high 15% interest rate to control inflation, increasing borrowing costs and dampening economic growth prospects, impacting consumer spending and business investment decisions.

Impact of Tariffs on Canadian Mining Sector

US tariffs on copper imports pose risks to Canadian mining, though major producers like Teck Resources and New Gold currently avoid direct exposure by exporting primarily to Asia and Europe. Quebec’s copper smelter may face challenges. Tariffs contribute to broader trade war uncertainties, potentially affecting business confidence and investment in mining supply chains.