Mission Grey Daily Brief - February 11, 2025
Summary of the Global Situation for Businesses and Investors
The global situation is currently characterised by a brutal conflict in the Democratic Republic of Congo, Trump's trade war, rising tensions in the Middle East, and China's demographic crisis. The conflict in the DRC has the potential to spiral into a wider regional war, impacting mineral-rich regions and displacing civilians. Trump's trade war has led to retaliation from China, with China's economy facing a quadruple blow despite a spending boom. Rising tensions in the Middle East, including a fragile ceasefire between Israel and Hamas, and Iran's threat to shut down the Strait of Hormuz, could have significant implications for global oil trade. China's demographic crisis, marked by a decline in marriages and a shrinking population, poses challenges for the country's long-term economic growth.
Conflict in the Democratic Republic of Congo
The Democratic Republic of Congo (DRC) is currently experiencing a brutal conflict that has the potential to spiral into a wider regional war. The conflict is centred around the eastern region of the country, which is rich in minerals and has never enjoyed much stability. The Rwanda-backed rebel group M23 has made significant advances in the region, seizing the capital of North Kivu state and moving south to expand its territory. The humanitarian consequences of the violence are profound, with sexual violence as a weapon of war, children forced to fight, and millions displaced. The conflict is the latest episode of a decades-long struggle in the region, with about 6 million people killed and more than 3 million displaced in the most recent fighting.
The DRC is a prime example of the "resource curse", where an abundance of raw materials leads to authoritarian regimes and civil wars. The country has approximately $24 trillion worth of natural resources, including cobalt, copper, niobium, tantalum, coltan, diamonds, gold, silver, zinc, manganese, tin, uranium, and coal. However, about a fifth of its population relies on aid to survive. The weak state institutions and corrupt governments have failed to benefit the people or invest in essential infrastructure.
The regional summit aimed at ending the violence ended with a call for an immediate and unconditional ceasefire. However, many fear that a ceasefire is less likely than escalation to a wider regional war. The fate of civilians in the region, who are frequently the subject of ethnically targeted attacks, is at stake.
Trump's Trade War
Trump's trade war has led to retaliation from China, with China's economy facing a quadruple blow despite a spending boom. The deflationary crisis in China is compounded by sluggish domestic consumption, an out-of-character production slump, and the recent imposition of tariffs from the United States. As the world's leading industrial manufacturer and top exporter of goods, the health of the Chinese economy has profound knock-on effects for global supply chains and markets.
If China remains trapped in its deflationary spiral, an influx of cut-price Chinese goods into global markets could create intense competitive pressures for global manufacturers. As the world's second-largest importer, a weakened Chinese economy could slash demand for foreign products and deprive exporters of a critical marketplace.
Trump has indicated that he is open to a deal and might not impose tariffs if countries agree to buy more US products, particularly its oil and gas. However, the seemingly ad hoc nature of Trump's announcements of tariffs has caused chaos, confusion, and some abrupt about-faces. The practical difficulties and costs of collecting duties from massive volumes of relatively low-value items have also been a major factor.
Rising Tensions in the Middle East
Rising tensions in the Middle East could have significant implications for global oil trade. A fragile ceasefire between Israel and Hamas is at risk, with Hamas accusing Israel of breaking parts of the agreement. Trump's proposed U.S. takeover of Gaza after the war has the potential to inflame tensions in the region.
Iran's armed forces have warned that they could shut down the Strait of Hormuz if ordered by top officials, a move that would disrupt global oil trade. The Strait of Hormuz is a vital waterway for global energy markets, handling about 20 percent of the world's oil trade. Any disruption could trigger a surge in oil prices and escalate tensions between Iran and Western nations.
China's Demographic Crisis
China is facing a demographic crisis, marked by a decline in marriages and a shrinking population. The number of marriages in China fell to 6.1 million last year, 20% lower than in 2023 and down by more than 50% since 2013. The marital malaise is part of a bigger demographic crisis facing China. Although China boasts the world's second-largest population, at 1.4 billion people, the country's population is declining.
Until 2015, the state enforced a "one-child" policy to avoid urban overcrowding. However, since then, the high costs of child care and education have stymied government efforts to encourage people to have children. The shrinking population poses challenges for the country's long-term economic growth and social stability.
Conclusion
The global situation is currently characterised by a brutal conflict in the Democratic Republic of Congo, Trump's trade war, rising tensions in the Middle East, and China's demographic crisis. These events have the potential to impact global supply chains, markets, and oil trade, as well as regional stability and social cohesion. Businesses and investors should closely monitor these developments and consider their potential impact on their operations and investments.
Further Reading:
China's economy facing quadruple blow despite spending boom - Newsweek
February 10: The front page of Times of Malta 10, 25 and 50 years ago - Times of Malta
Iran Makes Threat Over Key World Oil Supply Route - Newsweek
News Wrap: Ceasefire at risk as Hamas accuses Israel of breaking parts of agreement - PBS NewsHour
The tragedy of the Democratic Republic of Congo - The New Statesman
Trump Tariff Escalation, Libya Mass Graves, Tractors v. Mercosur - Worldcrunch
Trump is intensifying his trade war. Australia may not be immune - Sydney Morning Herald
Trump unleashes chaos by distraction upon the international community - PBS NewsHour
Trump will formally announce steel and aluminum duties Monday, including on Canada - Toronto Star
Themes around the World:
Macroeconomic Stability and Inflation Control
Egypt's Central Bank maintains high interest rates (21-22%) to curb rising inflation, which reached 12.5% in October 2025. Despite inflationary pressures from fuel price hikes and rent reforms, GDP growth remains robust at 5.2-5.3%. This cautious monetary policy balances growth support with inflation containment, impacting investment costs and business planning.
Energy and Major Infrastructure Projects
Canada is accelerating major energy and infrastructure projects, including LNG expansions, nuclear developments, and critical mineral mining. However, political, regulatory, and Indigenous opposition, especially in British Columbia, pose significant challenges. These projects are vital for Canada’s economic future and supply chain control but face delays and capital constraints, affecting international trade and investment timelines.
Foreign Exchange Market Growth
Turkey's foreign exchange market is projected to grow from $11.19 billion in 2024 to $24.68 billion by 2033, driven by tourism, services surplus, and booming e-commerce exports. Enhanced digital payment platforms and fintech adoption facilitate SME participation in international trade, improving market liquidity and reducing reliance on volatile capital flows.
Trade Policy Shifts and Tariff Challenges
Rising protectionism and tariff escalations, particularly between the US and Asian exporters, reshape global supply chains and trade dynamics. India faces tariff pressures on key export sectors, prompting government support measures and emphasizing the need for trade diversification to mitigate risks and sustain export competitiveness amid evolving global trade policies.
Logistics and Warehousing Market Expansion
Egypt's logistics and warehousing sector exceeded $13 billion, propelled by infrastructure investments in the Suez Canal Economic Zone and free zones. Growth is driven by export-oriented manufacturing, e-commerce, and technological advancements in freight and warehousing services. This sector's expansion supports Egypt's emergence as a North African and Eastern Mediterranean logistics hub, enhancing supply chain efficiency and trade competitiveness.
Oil Market Volatility and Supply-Demand Imbalance
Global oil markets face volatility from geopolitical tensions and sanctions on Russian exports, juxtaposed with OPEC+ production increases and uncertain demand. While sanctions tighten supply from Russia and Iran, oversupply concerns persist, pressuring prices downward. This complex environment challenges energy market forecasting and investment strategies, requiring careful risk assessment by stakeholders.
Tourism Sector Vulnerability
Chinese travel advisories against visiting Japan have led to sharp declines in inbound tourism, significantly impacting Japan's service sector, including retail, hospitality, and airlines. Given China's substantial share of Japanese tourists, this downturn threatens revenue streams, employment, and consumer spending, with broader implications for urban economies and cross-border business relations.
Geopolitical Tensions and Energy Security Risks
Heightened geopolitical risks, including Iran's seizure of a tanker near the Strait of Hormuz and ongoing regional conflicts, have injected volatility into global oil markets. The strategic importance of the Strait as a chokepoint for 20% of global oil supplies raises the risk of supply disruptions, potentially causing sharp price spikes and destabilizing energy-dependent industries worldwide.
Foreign Direct Investment Surge
Mexico experienced a record surge in foreign direct investment (FDI), reaching over US $40.9 billion in the first nine months of 2025, a 14.5% increase from 2024. This growth reflects strong investor confidence, driven by nearshoring trends, manufacturing, financial services, and emerging sectors like data and energy, bolstering Mexico's economic outlook despite other risks.
Resilient Financial Markets and Banking Sector Growth
Egypt’s stock market shows renewed foreign investor interest with rising liquidity and broad-based gains across indices. The banking sector is projected to grow at a 13.97% CAGR to $401.7 million by 2033, driven by AI adoption in credit scoring, fraud detection, and customer service. This modernization supports financial inclusion and economic expansion.
Fiscal Stimulus and Tax Reform Initiatives
PM Takaichi's administration is pursuing significant fiscal stimulus and tax reform aimed at spurring investment and consumption while addressing fiscal deficits. These policy measures seek to counteract economic contraction but may introduce policy tensions with monetary tightening, impacting business planning, investment flows, and market expectations in Japan and beyond.
Political Instability and Leadership Speculation
Growing political tensions within the UK Labour Party and speculation over Prime Minister Keir Starmer’s leadership are heightening market anxiety. This political noise exacerbates economic uncertainty, influencing currency volatility and investor confidence, which in turn affects trade negotiations and foreign direct investment flows.
China's Role as Major Global Lender
China has emerged as the largest lender to the US, extending over $200 billion in credit since 2000, despite Washington's warnings about Beijing's 'debt trap' diplomacy. This financial entanglement highlights China's strategic pivot towards wealthy economies, influencing infrastructure, technology acquisitions, and geopolitical leverage in global finance.
Tourism and Entertainment Sector Growth
Tourism is emerging as a major non-oil economic contributor, targeted to reach 10% of GDP and create 1.6 million jobs by 2030. Large-scale projects like NEOM and the Red Sea Project aim to develop luxury tourism and entertainment, diversifying revenue streams but remain vulnerable to regional security concerns.
S&P Credit Rating Affirmation
S&P Global Ratings affirmed Thailand's BBB+ credit rating with a stable outlook, reflecting confidence in the government's transparent economic policies and fiscal discipline. Strategic investments in infrastructure, particularly the Eastern Economic Corridor, and sustained current account surpluses underpin external stability. However, political stability remains a key factor influencing future economic management and investor confidence.
Foreign Exchange Market Growth
Turkey’s foreign exchange market is expanding rapidly, projected to grow from $11.19 billion in 2024 to $24.68 billion by 2033 (CAGR 8.23%). Growth is driven by tourism, services surplus, and booming e-commerce exports, enhancing liquidity and currency stability for international trade.
Labor Market and Workforce Dynamics
The potential end of the Ukraine conflict may trigger a return of Ukrainian workers from Poland, impacting labor supply and economic growth in Poland and Ukraine. A projected outflow of 500,000 workers could reduce Poland's GDP growth by up to 0.8 percentage points short-term. This labor shift affects sectors reliant on Ukrainian labor, wage pressures, inflation, and cross-border investment decisions.
Energy Sector Dynamics and Infrastructure Expansion
Indonesia's oil and gas market is projected to grow modestly with a CAGR of 1.54% through 2033, driven by rising domestic energy demand and government initiatives to improve infrastructure and contract terms. Investments in natural gas and cleaner energy sources aim to enhance energy security and reduce import dependence.
Geopolitical Military Risks and Economic Impact
US reports warn that a Chinese military blockade or invasion of Taiwan could occur with minimal warning, potentially causing a catastrophic global economic shock wiping out up to 10% of global GDP. The risk of nuclear escalation and regional instability heightens uncertainty for investors and global supply chains reliant on Taiwan.
Robust Post-Conflict Economic Growth
Israel's economy rebounded sharply with a 12.4% annualized GDP growth in Q3 2025, driven by surges in private consumption, exports, and investments following wartime contractions. This resilience underscores the economy's capacity to absorb shocks and sustain growth, positively affecting investor sentiment, supply chain stability, and long-term business planning despite ongoing regional uncertainties.
Trade Integration and Export Diversification
Vietnam's exports rose 16.2% to $391 billion in the first 10 months of 2025, supported by extensive FTAs including CPTPP, RCEP, and bilateral agreements with major economies. The country is diversifying exports and climbing the value chain, leveraging competitive labor costs and strategic location, which strengthens its global trade position and supply chain integration.
Project Finance Market Recovery
Turkey’s project finance sector showed a strong rebound in 2024, growing 185% to $7.3 billion with 15 transactions. Key sectors include transportation and renewable energy, supported by significant international financing. This recovery signals renewed investor interest in strategic infrastructure and energy projects, critical for long-term economic development.
Logistics Sector Growth and Modernization
Vietnam's logistics market reached $80.65 billion in 2024 and is projected to grow at 6.4% CAGR through 2034. Growth drivers include expanding manufacturing, trade integration, e-commerce logistics, green logistics initiatives, and digital technology adoption. Infrastructure investments and strategic location enhance Vietnam's role as a Southeast Asian logistics hub, supporting supply chain efficiency.
Deepening India-Israel Economic Partnership
India emerges as a strategic growth partner for Israel, with expanding trade, investment, and collaboration in manufacturing, cybersecurity, water technology, and infrastructure. Initiatives like the India-Middle East-Europe Economic Corridor (IMEC) enhance connectivity and trade opportunities, positioning Israel to leverage India's economic scale and demographic dividend for mutual benefit.
Taiwan's Energy Vulnerabilities
Taiwan's heavy reliance on imported energy, particularly LNG and coal, creates a critical vulnerability. Chinese gray-zone tactics may target Taiwan's energy imports and infrastructure, risking prolonged power outages that could cripple semiconductor production and global supply chains. Taiwan is planning energy capacity expansions to meet rising demands from tech sector growth.
Economic Growth and Sectoral Expansion
Egypt's economy achieved a three-year high GDP growth of 5.3% in Q1 2025/26, driven by strong performance in non-oil manufacturing, tourism, telecommunications, and financial intermediation. Private investment surged by 25.9%, signaling increased business confidence. However, the extractive sector contracted. This growth trajectory enhances Egypt's attractiveness for investors and global trade partners.
Global Economic Interconnectedness and US Market Risks
The UK market remains sensitive to US stock market instability due to interconnected financial systems. Potential US market corrections could spill over into UK markets, affecting investor sentiment and prompting defensive investment strategies, underscoring the importance of diversification and risk management in portfolios.
Trade Deficit Reduction and Export Diversification
Egypt's trade deficit narrowed by 16% to $26.3 billion in the first 10 months of 2025, aided by a 19% surge in non-oil exports to $40.6 billion. Key export markets include UAE, Turkey, Saudi Arabia, Italy, and the US. Export growth in building materials, chemicals, food, and engineering products reflects successful diversification, improving Egypt's global trade competitiveness.
Export Crisis and Structural Economic Flaws
The World Bank identifies Pakistan's export decline as a symptom of deep structural issues, including inconsistent policies, high energy costs, and inefficient trade agreements. Export-to-GDP ratio has fallen to 10%, causing a $60 billion loss in potential exports. Without market-based exchange rate reforms and trade policy overhaul, Pakistan's competitiveness and foreign exchange earnings will remain constrained, impacting trade and investment.
Economic Hardship from War in Russia
Putin's war in Ukraine is causing widespread economic pain in Russia, with rising inflation outpacing wage growth and consumer spending cuts. Energy infrastructure attacks and sanctions have fractured key industries, undermining earlier fiscal stimulus gains and signaling deteriorating domestic economic conditions that complicate business operations and reduce market stability.
Labor Market and Regional Economic Impact
Potential post-war repatriation of Ukrainian workers from neighboring countries like Poland poses risks to labor supply and GDP growth in host economies. This dynamic creates uneven economic effects, with some sectors facing labor shortages while others benefit from reduced risk premiums.
Record Banking Sector Profits Amid Public Criticism
Israel's major banks reported record profits in Q3 2025, driven by high interest rate spreads despite rate cuts. However, public and governmental criticism mounts over perceived profiteering at consumers' expense, prompting potential regulatory interventions. This dynamic influences financial sector stability, credit availability, and investor sentiment toward Israeli financial institutions.
Sovereign Wealth Fund Governance Concerns
The sovereign wealth fund Danantara faces criticism for overlapping mandates, unclear financing, and governance issues. Economists warn that its dominance over state-owned enterprises may crowd out private sector competitiveness and create conflicts of interest, potentially undermining Indonesia's business climate and investor confidence.
Economic Contraction and Industrial Weakness
Mexico's economy contracted by 0.3% in Q3 2025, driven by a 1.5% decline in industrial activity amid trade tensions and tighter financial conditions. This slowdown raises concerns about meeting growth targets, with manufacturing and construction sectors particularly affected, signaling challenges for economic policymakers and potential pressures for stimulus measures.
US Equity Market Resilience and Volatility
Despite shutdown-induced volatility and risk-off sentiment, US equity markets showed resilience, with relief rallies post-shutdown and mixed sector performance. Technology stocks faced pressure amid AI valuation concerns and regulatory risks, while energy and industrial sectors benefited from supportive policies. Market dynamics reflect investor sensitivity to Fed policy, economic data, and geopolitical developments, shaping investment strategies.
Infrastructure and Energy Constraints
Persistent infrastructure bottlenecks, especially electricity shortages (load-shedding), and logistical disruptions at key ports and railways increase operational costs and hamper competitiveness. These challenges affect both SMEs and large corporations, reducing productivity and deterring investment, highlighting the urgent need for infrastructure modernization and energy sector reforms.