Investment climate amid persistent uncertainty

Despite resilience narratives, repeated escalations elevate country risk premiums, delay capex, and complicate M&A and project finance. Growth expectations are being revised with conflict-duration sensitivity; firms should anticipate more conservative valuations, stronger covenants, and higher insurance costs for assets and personnel.

Water security and municipal service risk

Water shortages and weak municipal maintenance disrupt operations in major metros and industrial zones. National plans include >R156bn for water/sanitation and a new National Water Resources Infrastructure Agency from 2026, but near-term outages and leak losses persist.

Renewed tariff escalation via Section 301

New Section 301 probes into “excess capacity” and forced-labour-linked imports could enable fresh U.S. tariffs by summer 2026, even after courts constrained emergency tariffs. Expect compliance, pricing and rerouting impacts across Asia/EU suppliers and U.S. buyers.

Trade headwinds and industrial policy

Japan faces softer GDP momentum and external trade frictions, including U.S. baseline tariffs affecting exports. Government is prioritizing ‘economic security’ investment in strategic sectors. Expect targeted subsidies, localization incentives, and greater scrutiny of foreign investment in key technologies.

Volatilidade macro, juros e câmbio

Inflação (IPCA-15) surpreendeu e o Copom sinaliza início de cortes da Selic, hoje alta, enquanto projeções apontam Selic de 12% no fim de 2026 e câmbio perto de R$5,42. Para importadores/exportadores, aumenta risco de hedge e custo de capital.

Political transition and policy continuity

Election results have been certified, enabling parliament to convene and a new coalition to form by April. Near-term regulatory and budget priorities may shift under a Bhumjaithai-led cabinet, affecting investor confidence, public spending timelines and sector policy execution.

Monetary policy uncertainty and capital costs

Fed minutes show two-sided risk: inflation near 2.4–2.9% keeps cuts uncertain and raises tail risk of tighter policy if tariffs or energy shocks lift prices. Higher-for-longer rates affect U.S. demand, project finance, FX and inventory carrying costs globally.

Monetary policy constrained by risk

The Bank of Israel held rates at 4% citing increased risk premium despite inflation easing into target. Elevated geopolitical uncertainty can keep financing costs higher for longer, influence credit spreads, and add volatility to the shekel—affecting pricing, hedging, and M&A valuations.

Logistics rerouting and delivery delays

Cape-of-Good-Hope diversions add thousands of kilometers and create schedule instability across Asia–Europe and ME/India lanes. Companies should expect longer lead times, higher safety-stock needs, and contract renegotiations for time-sensitive cargo and just-in-time manufacturing.

Inflation and lira policy volatility

Inflation remains elevated (about 31.5% y/y in February) and policy rates are tight (37% with overnight funding near 40%) amid energy-price shocks. FX interventions and liquidity measures add uncertainty for pricing, hedging, import costs, and local-currency contracting.

Transition auto: volatilité EV et subventions

Le revirement de Stellantis, avec 22,3 Md€ de perte 2025 et réduction de projets électriques, illustre l’incertitude de la demande et des politiques EV. Risques pour fournisseurs, batteries, investissements industriels et planification de capacités, avec retour partiel au thermique.

Critical minerals export licensing

China is expanding and enforcing export controls on dual-use and strategic materials, including rare-earth-related items and metals like gallium/germanium. New restrictions (including toward Japan) increase procurement uncertainty, lead times, and price volatility for electronics, aerospace, defense-adjacent, and clean-tech supply chains.

Hormuz security and war risk

Conflict-driven threats around the Strait of Hormuz are disrupting traffic, with vessels attacked and war-risk cover withdrawn by major P&I clubs. Higher premiums, rerouting, and delays raise landed costs for energy and all Gulf-linked cargo, complicating scheduling and inventory planning.

Regional conflict spillovers

Gaza and broader regional war dynamics elevate security and operational risks, including aviation disruptions and refugee-related fiscal strain. Firms should plan for intermittent border, shipping, and air-route interruptions, plus episodic social and political pressures that can affect permitting and enforcement.

Critical minerals geopolitics and partnerships

Brazil is positioning rare earths and other critical minerals as strategic, courting EU, US and India partnerships and funding. Opportunity is large but hinges on permitting, processing capacity, and geopolitical screening—impacting FDI, offtakes, technology transfer, and supply security planning.

Nickel quota cuts, ore scarcity

Lower 2026 nickel-ore RKAB quotas (260–270m tons vs 379m in 2025) risk a ~130m-ton feedstock gap and 70–75% smelter utilization. Rising ore imports and allocation disputes increase cost volatility and execution risk for EV, stainless, and upstream investors.

Trade policy shifts and tariff shocks

A reported 30% US tariff shock and uncertainty around preferential access increase market-diversification pressure. Government export support desks and AfCFTA routing are growing in relevance, influencing pricing, rules‑of‑origin planning, and near‑term investment decisions in export sectors.

Nickel quota cuts reshape supply

Pemerintah memangkas kuota bijih nikel RKAB 2026 menjadi 260–270 juta ton dari 379 juta (2025), memicu potensi defisit hingga ~130 juta ton dan utilisasi smelter turun 70–75%. Risiko impor naik, biaya bahan baku meningkat, kontrak offtake tertekan.

Lira volatility and inflation

Inflation remains elevated (31.5% y/y in February) and geopolitical shocks have forced tight liquidity; Turkey reportedly spent $12bn defending the lira. FX instability raises pricing risk, working-capital needs, hedging costs, and import affordability for energy and inputs.

Sanctions, geopolitics and compliance risk

Middle East escalation is driving route changes around the Cape; South African ports may see diversion opportunities but weather and capacity constraints persist. Separately, perceived ties to sanctioned states elevate secondary‑sanctions and banking de‑risking concerns for cross‑border transactions.

Judicial uncertainty in agribusiness ESG

The Supreme Court is reviewing litigation around the Soy Moratorium, suspending related proceedings to reduce legal turmoil. Outcomes affect soy sourcing, deforestation-linked compliance, tax incentives, and buyer requirements—material for traders, food companies, and lenders exposed to ESG risks.

Port capacity expansion, logistics gains

Cai Mep–Thi Vai handled 711,429 TEUs in Jan 2026 (+9% y/y) with 48 weekly international routes, over 20 direct to the US and Europe. New expressway and bridge links could cut factory-to-port transit from ~2 hours to 45–60 minutes, lowering logistics costs.

Yen volatility and policy normalization

BoJ normalization and potential FX intervention are back in focus as yen weakens near 157–160/USD. Rate-hike timing hinges on wages and inflation. Volatility affects import costs, hedging, repatriation, and pricing for exporters and Japan-based multinationals.

Middle East war disrupts logistics

Iran war effects include Strait of Hormuz disruption and heightened war-risk insurance, while Turkey–Iran border day-trip crossings were suspended. Shipping delays, higher freight premiums, and rerouting pressure supply chains; Turkey may benefit as an alternative Eurasian logistics hub.

Yen volatility, BoJ normalization

Yen weakness near ¥158–160/$ and intervention risk coincide with gradual BOJ tightening (policy rate 0.75%). Higher import costs (energy, inputs) and rate uncertainty affect hedging, pricing, and Japan-based investment returns; funding-currency dynamics may reverse.

European industrial competition pressures

French heavy industry warns that high European energy costs, Chinese overcapacity, and evolving EU carbon rules squeeze margins and may trigger shutdowns or reshoring bids. Industry groups seek ETS adjustments to cut gas costs by about 10% (~€5/MWh), influencing investment decisions.

Manufacturing upcycle and FDI surge

FDI disbursement hit a five-year high in early 2026, with over 80% flowing into processing/manufacturing and growing interest in electronics, semiconductors, and supporting industries. This strengthens Vietnam’s role in global production networks but intensifies competition for land, labor, and suppliers.

Carbon compliance and industrial decarbonisation

Safeguard Mechanism obligations and evolving carbon-market rules increase compliance costs for high-emitting facilities and upstream suppliers. This accelerates demand for low-carbon inputs, electrification, and offsets, and may shift location choices for new capacity in metals, chemicals, and LNG-linked value chains.

Logistics reform amid driver shortage

Japan is legislating logistics reforms to address the trucking labor crunch, subsidizing relay cargo facilities and tightening operational practices. Firms may face higher domestic distribution costs, new contracting standards, and pressure to redesign warehousing networks and delivery lead times.

Renewed US tariff escalation risk

Washington has opened Section 301 probes into alleged Chinese industrial overcapacity and forced-labour-linked imports, with potential new tariffs by mid-year. This reintroduces abrupt duty risk, pricing shocks, and compliance burdens across autos, batteries, chemicals, electronics and solar supply chains.

Ports and rail logistics fragility

Transnet’s operational constraints and debt (≈R144bn, ~R15bn annual interest) underpin unreliable rail/port throughput. Locomotive shortages, vandalism and >R30bn maintenance backlog constrain exports. Reforms and corridor upgrades are progressing, but disruption risk remains significant for bulk and containerised supply chains.

Critical minerals concentration risk

U.S. dependence on China for inputs like gallium and other strategic materials remains acute, while Beijing’s export-control suspensions have clear expiry deadlines. Companies should plan dual sourcing, strategic stockpiles, and qualification of non-China suppliers to avoid production stoppages.

Nickel ore quota squeezes smelters

Indonesia cut 2026 nickel ore RKAB to ~260–270m tons versus ~340–350m tons required for ~2.7m tons RKEF/HPAL capacity, pushing utilization toward 70–75% and driving ore imports (potentially ~50m tons) and cost volatility for EV/stainless supply chains.

Export controls and AI chip containment

US export controls on advanced AI semiconductors are tightening amid reports of diversion and alleged China access to restricted chips. Expect greater end-use scrutiny, licensing delays, and expanded controls on cloud, data centers, and AI model-related supply chains affecting global tech operations.

Migration rules tighten for settlement

Government proposes extending Indefinite Leave to Remain from five to 10 years, potentially applied retrospectively, with higher English and tax-history requirements but fast tracks for top earners and NHS roles. Talent attraction, staffing costs, and project continuity risks rise for internationally mobile employers.

Investment-sector liberalisation agenda

Government plans to revise the investment “closed sectors” list to expand private participation. While supportive for FDI and PPP pipelines, investors remain in wait-and-see mode on which sectors open and implementation details, especially licensing, central-local harmonisation, and competitive neutrality.