Middle East Shock Hits Economy

Thailand cut its 2026 growth forecast to 1.6%, while the central bank sees 1.5% growth and 2.9% inflation as conflict-driven oil prices raise business costs. Import dependence on energy increases exposure for transport, manufacturing, consumer demand and currency stability.

Tighter healthcare marketing regulation

France’s medicines regulator fined Novo Nordisk France €1.78 million and Lilly France €108,766 over obesity-drug campaigns deemed indirect prescription advertising. The enforcement signals stricter compliance expectations in pharmaceuticals, health marketing, and product launch strategies for regulated consumer-facing sectors.

Hormuz disruption reshapes trade

Regional conflict and disruption in the Strait of Hormuz are forcing rerouting of energy and container flows, raising freight costs and transit uncertainty while increasing Saudi Arabia’s importance as an alternative corridor for Gulf-Europe and intra-regional trade.

Foreign Business Climate Deterioration

Immediate implementation of new rules without consultation, plus restrictions on foreign software and broad anti-discrimination enforcement, are worsening the operating environment for foreign firms. Companies face higher regulatory unpredictability, greater pressure to localize, and more difficult China derisking strategies.

Fiscal Extraction from Business

Moscow is considering new windfall levies on commodity producers and banks after a similar 2023 tax raised 318.8 billion rubles, highlighting rising fiscal pressure on profitable sectors and increasing policy unpredictability for investors, lenders and joint-venture partners.

Investment Momentum Broadens Geographically

Total FDI reached $88.29 billion in April-February 2025-26, with net FDI rising to $6.26 billion and officials expecting about $90 billion for the full year. Grounded projects across 14 states signal expanding industrial opportunities, especially in chemicals, pharma, electronics, and auto-EV.

Cross-Strait Disruption Risk Escalates

China’s expanding blockade and quarantine-style drills around Taiwan are the most significant business risk, threatening shipping, aviation insurance, energy imports, and semiconductor exports. Even partial coercion could disrupt regional logistics, raise costs sharply, and force contingency planning across electronics, manufacturing, and trade finance.

Election Cycle Delays Dealmaking

US political uncertainty is influencing bilateral trade negotiations and corporate timing decisions. Trading partners such as India are slowing commitments until after the November 2026 midterms, while businesses defer long-term tariff, tax and market-entry bets pending clearer policy signals.

Escalating Sanctions Enforcement Network

Washington expanded pressure with sanctions on 35 shadow-banking entities and individuals, part of roughly 1,000 Iran-related actions since February 2025. The measures heighten secondary-sanctions exposure for banks, traders, insurers, and China-linked counterparties handling Iranian commerce.

Vision 2030 Delivery Push

Saudi Arabia has entered Vision 2030’s final phase with 93% of KPIs on or above target and 90% of initiatives completed or on track, accelerating privatization, local-content mandates and sector strategies that will shape market access, procurement and long-term capital allocation.

US Trade Scrutiny Intensifies

Indonesia will meet the USTR on 12 May over a Section 301 tariff investigation focused on excess capacity, transshipment from China, and forced labor concerns. The case matters for labor-intensive exports to America, Indonesia’s second-largest export market and biggest surplus destination.

Reshoring Incentives Meet Friction

U.S. policy still favors domestic manufacturing and strategic self-sufficiency, yet companies report tariffs often redirect investment to Mexico or Southeast Asia rather than the United States. That gap between industrial policy goals and execution keeps footprint planning and supplier localization difficult.

US-China Strategic Frictions Deepen

Commercial relations with China remain constrained by unresolved disputes over tariffs, export controls, rare earths, technology access, and Iran-related tensions. This raises exposure for firms dependent on Chinese inputs, cross-border e-commerce, semiconductors, and politically sensitive supply chains serving both markets.

Industrial Strategy and Reshoring

Government efforts to protect strategic industries are reshaping supply chains through tariffs, subsidies and targeted support. Manufacturers warn domestic production losses in chemicals, fuels and steel increase import dependence, while planned electricity bill cuts of up to 25% aim to retain investment.

Financial Isolation and Payment Frictions

Transaction bans on 20 more Russian banks, crypto-service prohibitions and constraints on the digital rouble are deepening payment fragmentation. Businesses trading with Russia face greater settlement delays, reduced banking options, higher intermediary costs and growing difficulty repatriating funds or structuring compliant transactions.

Afghanistan Corridor And Border Disruption

Pakistan-Afghanistan tensions and failed China-mediated talks continue to impede overland connectivity essential for western trade corridors and Gwadar’s commercial logic. Border insecurity disrupts transit reliability, complicates regional supply chains, and reduces confidence in Pakistan’s role as a stable land bridge to Central Asia.

Resource Export Logistics Under Strain

Australia’s resource and agricultural export system faces growing vulnerability from fuel shortages, global shipping bottlenecks and conflict-driven trade disruption. Canberra is actively using diplomacy to keep inputs such as fuel and fertiliser flowing, reflecting rising fragility in core export logistics networks.

Gwadar And CPEC Security Deterioration

Security around Gwadar has worsened as Baloch insurgents expanded attacks from land to sea, including an April 12 assault near Jiwani. Combined with threats to Chinese-linked infrastructure, this raises insurance, routing, and project-security costs for logistics, shipping, and infrastructure operators.

Oil Export Collapse Pressure

US maritime pressure is sharply constraining Iran’s oil exports, with Kpler estimating shipments fell to about 567,000 barrels per day from 1.85 million in March. That erodes fiscal revenues, reduces dollar inflows, and heightens medium-term energy market volatility.

Energy Infrastructure Faces Security Risk

Iran-linked threats exposed the vulnerability of offshore gas platforms and raised Israel’s energy risk profile. Temporary shutdowns of Leviathan and Karish increased electricity costs by about 22% and caused roughly NIS 1.5 billion in economic damage, underscoring infrastructure exposure for investors and industry.

Anti-Decoupling Regulatory Retaliation

New Chinese rules allow investigations, asset seizures, expulsions, and other countermeasures against foreign entities seen as undermining China’s industrial or supply chains. This raises legal and operational risk for companies pursuing China-plus-one strategies or complying with extraterritorial sanctions.

Sectoral Tariffs Reshaping Industries

Section 232 and Section 301 actions are extending beyond steel and aluminum into pharmaceuticals and other strategic sectors. Firms now face uneven tariff regimes, country-specific carveouts, and pressure to onshore production or negotiate exemptions, materially altering location, sourcing, and market-entry decisions.

Export Competitiveness Under Strain

Goods exports fell 14.4% year-on-year in March to $2.264 billion, while July–March exports declined 8% to $22.73 billion. High energy tariffs, expensive credit, delayed refunds and weak diversification are undermining textile-led export sectors central to trade and sourcing strategies.

US Trade Pressure Escalates

Washington has intensified scrutiny of Vietnam through Special 301 and broader Section 301 probes covering IP enforcement, overcapacity and labor concerns. Potential tariffs threaten export competitiveness, especially in footwear, electronics and other US-facing manufacturing supply chains.

Energy Costs and Circular Debt

Power and gas sector liabilities remain a major business constraint, with electricity circular debt reaching about Rs1.84 trillion by February 2026 and gas debt above Rs3.4 trillion. Tariff hikes, unreliable supply and reform delays raise manufacturing costs, impair competitiveness and complicate long-term industrial investment.

Industrial Localization and Mining

Saudi Arabia is deepening industrial policy through local manufacturing, mining, and value-chain localization. Industrial investment has reached about SR1.2 trillion, factories exceed 12,900, and estimated mineral wealth rose to SR9.4 trillion, supporting opportunities in equipment, processing, and supplier networks.

Pound Stability Remains Fragile

The pound has stabilized after IMF-backed reforms and Gulf inflows, but remains vulnerable to external shocks and volatile portfolio capital. Analysts expect roughly 51.58 pounds per dollar by end-June, with renewed pressure from energy prices, shipping disruption, and risk-off flows.

Critical Minerals Supply Vulnerability

US efforts to reduce dependence on Chinese rare earths and strategic inputs are colliding with Beijing’s tighter licensing and broader coercive toolkit. Recent shortages affected auto supply chains within weeks, underscoring exposure in aerospace, electronics, defense-linked manufacturing, and energy-transition industries operating through the United States.

Semiconductor Export Supercycle

April exports rose 48 percent year on year to $85.9 billion, with semiconductor shipments reaching $31.9 billion and memory prices surging sharply. Strong AI-driven demand supports trade and investment, but heightens concentration risk across Korea’s export base and supplier networks.

USMCA Tariffs Here to Stay

Washington has signaled automotive, steel and aluminum tariffs will persist through the 2026 USMCA review. Mexico sent over 2.8 million of 4 million vehicles produced in 2024 to the United States, so enduring duties will materially alter pricing, margins and investment planning.

Non-Oil Growth Resilience

Non-oil activities now contribute about 55% of GDP, with 2025 non-oil growth around 4.9% and April PMI returning to 51.5. For international firms, diversification improves sector opportunities, though demand remains sensitive to delayed spending and regional instability.

Electricity Tariff Affordability Pressure

Although blackouts have receded, electricity costs remain a major competitiveness problem. Government says double-digit tariff increases should end, yet high power prices are squeezing households, lowering demand, and raising operating expenses for mines, smelters, manufacturers, retailers, and logistics operators.

Emerging Iran-Central Asia Route

Pakistan has operationalised a Gwadar-Iran-Central Asia corridor, sending its first export consignment to Uzbekistan via Iran. The route could diversify transit options and reduce Afghan dependence, but sanctions exposure, infrastructure gaps, and security risks limit immediate scalability for international firms.

Semiconductor And Export Control Tightening

US semiconductor policy is becoming more restrictive, with targeted ‘is-informed’ letters and broader export-control expansion likely. Suppliers with large China exposure face revenue risk, while downstream manufacturers must prepare for tighter licensing, substitution challenges, and further fragmentation of global technology supply chains.

Agriculture Export Margin Pressures

Rice and other farm exporters face higher fuel, freight and insurance costs amid Middle East disruptions, while Thailand still targets over 7 million tonnes of rice exports. Margin compression affects agribusiness investment, food supply contracts and rural demand linked to consumer markets.

Environmental Compliance Trade Risk

Deforestation and possible forced-labor allegations are now embedded in trade and market-access discussions with the United States and other partners. Exporters in agribusiness, mining and biofuels face rising traceability, certification and reputational requirements that can reshape sourcing and compliance costs.