Shift Toward Defensive Industries

Japanese defense and aerospace stocks rallied amid rising geopolitical tensions and export controls. International investors should note the sector’s growing strategic importance, but also the risks of regulatory changes and supply chain bottlenecks linked to regional security dynamics.

Political Instability And Coalition Risks

South Africa faces heightened political uncertainty as local elections approach, with coalition governments struggling for stability. Persistent factionalism and service delivery failures threaten policy continuity, impacting investor confidence and business operations across key urban centers.

US-China Trade And Technology Tensions

Trade disputes and export controls between the US and China continue to escalate, with technology restrictions and retaliatory measures impacting semiconductor, automotive, and rare earth sectors. These tensions disrupt supply chains and force global businesses to diversify sourcing strategies.

Regional Conflict and Security Risks

Israel faces heightened regional instability from ongoing conflict with Gaza, Lebanon, and Iran, including a direct war with Iran in 2025. This environment increases operational risks, disrupts supply chains, and complicates cross-border business strategies for international firms.

Persistent Energy Infrastructure Attacks

Russian missile and drone strikes continue to target Ukrainian energy assets, causing widespread outages and supply chain disruptions. Energy sector volatility poses ongoing operational risks for manufacturing, logistics, and foreign investment.

Energy Transition Challenges

Germany's shift from fossil fuels to renewable energy faces infrastructural and regulatory hurdles, impacting industrial energy costs and supply reliability. This transition affects manufacturing competitiveness and investment decisions, as companies navigate fluctuating energy prices and potential shortages during peak demand periods.

UK-EU Trade Relations and Realignment

The UK’s trade growth is projected to lag the global average, with the EU remaining its most critical partner. Deepening ties with the EU is essential to offset slow growth with the US and China, and to maintain competitiveness amid rising protectionism and regulatory divergence.

Sanctions, Export Controls, and Compliance

The UK continues to update its sanctions and export control regimes, with a new consolidated list effective January 2026. Businesses must monitor evolving compliance requirements, especially in high-risk sectors, to avoid legal exposure and maintain international market access.

Sector-Specific Tariff and Regulatory Changes

The new US-Taiwan framework includes sectoral tariff caps and exemptions, notably for semiconductors, auto parts, and pharmaceuticals. These changes alter cost structures, market access, and compliance requirements for multinational firms operating in and with Taiwan.

Labor Market and Regulatory Evolution

Mexico’s labor market is adapting to increased demand from nearshoring and supply chain shifts, but regulatory changes, workforce development, and compliance remain critical. Evolving labor standards and business regulations will shape operational costs and investment strategies.

Broader Regional Economic Realignment

China’s selective engagement with South Korea and other regional actors amid Japan tensions signals a shifting economic landscape. Businesses must navigate evolving alliances, trade blocs, and competitive pressures across East Asia.

Strategic Infrastructure and Chabahar Port

Despite sanctions, Iran continues developing the Chabahar Port and North-South Transport Corridor, vital for regional connectivity and trade with India, Russia, and Central Asia. However, instability and external pressure threaten project timelines and long-term investment returns.

Rare Earth Export Restrictions

China has imposed bans on rare earth and dual-use exports to Japan, leveraging its dominance in critical minerals for electronics and EVs. These restrictions, triggered by diplomatic disputes over Taiwan, disrupt global supply chains and threaten manufacturing sectors reliant on Chinese materials.

Geopolitical Supply Chain Vulnerabilities

France and the broader EU face increasing risks from supply chain dependencies, especially for critical minerals, electrical steel, and copper. Geopolitical tensions with China and hardware scarcity challenge the resilience of industrial and energy supply chains, impacting cost structures and strategic planning.

Energy Sector Challenges

Iran's oil and gas sectors are critical to its economy but face challenges due to sanctions, aging infrastructure, and limited foreign investment. These factors constrain production capacity and export potential, affecting global energy markets and related supply chains.

Critical Minerals And Resource Sovereignty

South Africa’s mineral wealth faces strategic challenges as global demand for energy-transition metals rises. The Anglo American–Teck merger highlights regulatory gaps and declining tax revenues, raising concerns about mineral sovereignty and the nation’s ability to capture value from mining investments.

AI and Advanced Technology Investments

South Korea is tripling AI spending, aiming to become a top-three global AI power. This government-led push is accelerating innovation, attracting foreign direct investment, and reshaping the tech sector, with significant implications for supply chains and talent acquisition.

Geopolitical Risks in East Asia

Rising military tensions over Taiwan and the Senkaku Islands, with Chinese naval activity and Japanese security commitments, increase the risk of regional conflict. This instability directly affects trade, investment flows, and the strategic calculus of multinational firms operating in Asia.

Supply Chain Diversification Gains

Southeast Asia, including Thailand, is capturing sourcing share as global supply chains shift away from China due to tariffs and trade tensions. Thailand’s imports to the U.S. rose 28% in 2025, positioning the country as a key alternative for international supply chain strategies.

AI and Data Center Infrastructure Expansion

Driven by global hyperscaler investment, South Korea is rapidly expanding AI and data center infrastructure. Government plans to triple AI spending and attract major tech firms are accelerating sector growth, supporting innovation but also intensifying competition for talent and resources.

Global Supply Chain Vulnerabilities

China’s tightening of export controls on critical minerals and dual-use goods, especially to Japan, highlights the fragility of global supply chains. These actions, which impact sectors from semiconductors to EVs, force multinationals to reassess sourcing and resilience strategies amid rising geopolitical risk.

Massive Western Financial and Security Aid

The EU approved a €90 billion loan and the US is negotiating an $800 billion postwar recovery package for Ukraine. These funds, tied to reforms and military needs, are vital for budget stability, reconstruction, and investor confidence, but are contingent on ongoing anti-corruption efforts.

Black Sea and Ukraine Security Engagement

Turkey’s leadership in Black Sea naval security and post-war Ukraine reconstruction positions it as a key regional player. This enhances opportunities in defense, infrastructure, and logistics, but also exposes businesses to geopolitical risk from renewed conflict or shifting alliances.

Agriculture and Resource Export Volatility

Canadian agriculture, especially canola, seafood, and pork, remains highly exposed to tariff disputes. The reopening of the Chinese market is a relief for producers, but ongoing trade tensions highlight the need for diversified export destinations and robust risk management in agri-food supply chains.

Regulatory Environment and Trade Policies

South Korea's evolving trade policies, including free trade agreements and export controls, shape its attractiveness for foreign investment. Regulatory changes in data privacy, environmental standards, and corporate governance affect compliance costs and market access.

Political Uncertainty and Budget Delays

Delays in passing Taiwan's defense budget threaten procurement, maintenance, and deterrence capabilities. Legislative gridlock could undermine Taiwan's military readiness and resilience, increasing vulnerability to external pressure and affecting long-term business stability and investment planning.

Collapse in Russian Energy Revenues

Russian oil exports have plunged by 440,000 barrels daily, with Urals crude prices falling below $35 per barrel. Energy income now accounts for only 23% of Russia’s budget, down from over 50%, threatening fiscal stability and investment attractiveness.

Canadian LNG Expansion and Global Energy Role

Canada is accelerating LNG export capacity, aiming to become a top-six global exporter by 2030. Multiple projects are underway, but face challenges from global supply gluts, environmental opposition, and Indigenous stakeholder negotiations, affecting long-term investment and trade opportunities.

Nearshoring Drives Supply Chain Shifts

Mexico’s proximity to the US and resilient manufacturing sector have accelerated nearshoring, attracting investment and supply chain reconfiguration. Export growth to the US reached 9% in 2025, positioning Mexico as a strategic alternative amid global trade disruptions and China tariffs.

Energy Sector Reforms

Mexico's energy reforms, focusing on strengthening state-owned enterprises like PEMEX and CFE, affect foreign investment and energy prices. Recent policy shifts prioritize national control over resources, potentially deterring private and international investors, impacting energy supply stability and costs for industries.

Labor Market and Work-Life Balance Reforms

Legislation planned for 2026 will reduce excessive working hours and introduce the right to disconnect, aligning with OECD standards. These changes will affect operational costs, productivity, and compliance for international firms operating in South Korea.

China-Pakistan Economic Corridor 2.0 Expansion

Pakistan and China agreed to upgrade CPEC, focusing on industry, agriculture, mining, and infrastructure. The new phase aims to deepen trade, technology, and investment ties, with third-party participation encouraged, making CPEC central to Pakistan’s growth and regional integration.

China Imposes Beef Tariffs

China’s new 55% tariffs and quotas on Australian beef exports, effective January 2026, threaten to cut trade by a third and cost over AU$1 billion annually. This move disrupts supply chains and signals persistent volatility in Australia-China trade relations.

Regulatory Overhaul and Business Reforms

India is undergoing significant regulatory changes, including new acquisition financing rules, streamlined business laws, and enhanced ease of doing business. These reforms support structured growth, compliance, and transparency, reducing operational risks for international investors and businesses.

Energy Policy and Decarbonisation Challenges

Western Australia’s bureaucratic hurdles and integration issues threaten the state’s coal phase-out and decarbonisation goals. Organizational reform is critical to ensure policy coherence and attract investment in clean energy and industrial transformation.

Vision 2030 Economic Diversification Drive

Saudi Arabia continues to shift from oil dependency by investing in sectors like tourism, technology, mining, and renewable energy. Vision 2030 reforms drive non-oil GDP growth, foster innovation, and create new opportunities for international trade and supply chain integration.