Digital And Cyber Infrastructure Rise

Saudi Arabia is strengthening its position in cybersecurity and digital infrastructure, with Riyadh chosen for UNITAR’s first cybersecurity office and the kingdom ranked first again in the Global Cybersecurity Index. This supports cloud, AI and data-center investment, while elevating resilience expectations for operators.

Political Fragmentation And Policy Risk

A fractured National Assembly and approaching presidential election are increasing legislative uncertainty, including possible reliance on Article 49.3 or emergency budget mechanisms. For firms, this raises execution risk around reforms, fiscal stability, procurement timing, and the broader predictability of business policy.

Defense Export Boom and Backlash

Israel’s defense exports reached a record $19.2 billion in 2025, up nearly 30% year on year, with Europe taking 36% and Asia-Pacific 32%. The surge supports industrial activity, but sanctions, exhibition bans, and political scrutiny create reputational and market-access risks for counterparties.

Regional Conflict Security Overhang

Israel’s continuing exposure to Gaza, Lebanon and Iran-related escalation remains the dominant operating risk. Ceasefires have repeatedly wobbled, cross-border fighting has resumed intermittently, and security disruptions can rapidly affect insurance, staffing, aviation, tourism, project execution and investor confidence.

Steel Aluminum Energy Disputes Persist

Trade talks continue to cover steel, aluminum, autos, and energy policy, all areas with direct implications for exporters and investors. Mexico is seeking relief from Section 232 tariffs, while U.S. concerns over state-favored energy policies continue to weigh on industrial competitiveness and cross-border investment confidence.

Chinese EV Policy Complicates Auto Sector

Canada is allowing up to 49,000 Chinese EVs into its market at lower tariff rates, under 3% of total demand. The policy may attract investment but alarms North American automakers and U.S. officials over subsidy distortion, security concerns and integrated auto-supply-chain risks.

China Dependence Reshapes Trade Channels

Russia’s trade and payments architecture is increasingly dependent on China, especially for sanctioned imports, energy sales and yuan settlement. This concentration reduces diversification, increases bargaining asymmetry for Russian counterparties, and raises geopolitical, currency-convertibility and compliance risks for foreign businesses.

Overland Corridor Logistics Push

Saudi Arabia and Türkiye signed railway and logistics accords to revive a Gulf-Levant-Türkiye land corridor. Joint studies are due this year, with estimates around $5.5 billion, offering businesses a strategic alternative to disrupted maritime chokepoints and potentially faster Europe-bound cargo movement.

Freight logistics and port bottlenecks

Transnet weaknesses, port-entry corruption and border agencies operating at about 25% capacity continue to delay cargo flows, raise inland transport costs and undermine export reliability. For manufacturers, miners and retailers, logistics friction remains the most immediate drag on supply chains and delivery schedules.

External Sector Fragility Eases

Pakistan’s external position improved through March with remittances up 8.2% and a US$72 million current-account surplus, but April swung to a US$324 million deficit after Middle East disruptions increased oil and freight costs, exposing continued vulnerability in trade financing and import planning.

Human Capital Localization Push

Saudi Arabia is intensifying workforce localization and skills development, including mandatory AI education, 13,000-plus teachers trained in AI, and 39.9% localization in high-skill jobs. Investors gain from deeper talent pipelines but face continued Saudization compliance and labor-market adaptation pressures.

Migration Rules Distort Labour

Proposed settlement and visa changes are creating uncertainty for employers reliant on foreign labour, especially care, healthcare, construction and engineering. With around 111,000 care vacancies in England and migrant staff near 30% of the workforce, labour shortages may intensify.

Auto Tariffs and Origin Rules

Automotive negotiations are becoming the most consequential sectoral issue. Mexican officials say average U.S. tariffs on Mexican vehicles approach 18.75-19%, versus 15% for some Japanese and Korean cars, while Washington presses for stricter origin thresholds that could reshape sourcing, costs, and plant economics.

Tighter Immigration and Entry Controls

Thailand is tightening border screening through digital pre-clearance, a blacklist of 169,506 names and stricter visa enforcement, with nearly 30,000 entries denied this year. Businesses may benefit from stronger compliance, but tourism, expatriate mobility and staffing flexibility could face added friction.

Climate Stress Hits Logistics

A possible strong El Niño and recent concern over drought and weather disruption threaten crops, hydropower, and inland logistics. Climate volatility can raise food and energy prices, interrupt freight flows, and increase operational resilience costs for agribusiness, manufacturing, and consumer-goods supply chains.

USMCA Review and Tariff Risk

Canada faces elevated uncertainty ahead of the July 1 USMCA review as Washington signals annual reviews, not renewal. Ongoing disputes over autos, steel, aluminum, dairy and procurement could disrupt cross-border investment planning, sourcing decisions and tariff exposure management.

Energy Resilience and Power Costs

Taiwan’s post-nuclear energy debate is intensifying as semiconductors and AI expand electricity demand. Summer tariffs remain in place, renewable deployment lags targets, and energy-security planning is increasingly tied to blockade scenarios, making power reliability, green electricity access, and long-term operating costs strategic board-level issues.

Sanctions Pressure And Evasion

Tighter EU and UK sanctions on Russia’s shadow fleet, finance, crypto, and energy logistics may constrain Moscow’s war funding while reshaping regional trade compliance. Businesses operating around Ukraine must strengthen screening, shipping due diligence, and sanctions-evasion controls.

Energiepreise treiben Deindustrialisierung

Hohe Strom-, Gas- und CO2-Kosten setzen energieintensive Branchen wie Gießereien, Glas und Metallverarbeitung unter starken Druck. Eine IW-Analyse warnt, dass ein weiterer Rückgang der Gussproduktion um 50 Prozent 65 Milliarden Euro Wertschöpfung und 588.000 Arbeitsplätze gefährden könnte.

China competition and derisking

Germany is hardening its stance toward China as subsidized imports pressure autos, machinery, chemicals, and intermediate goods. Estimates suggest roughly 400,000 industrial jobs were lost from 2019-2025 due to Chinese trade distortions, accelerating derisking, tariffs debate, and supplier diversification strategies.

Severe Inflation Currency Collapse

Iran’s macroeconomic environment is acutely unstable, with reported inflation near 84-85 percent, food inflation above 100 percent, and the rial around 1.75-1.77 million per U.S. dollar. Extreme price volatility undermines contracts, consumer demand, payroll planning, and imported input affordability.

Regional Security Spillover Risks

Iran’s business environment remains tightly linked to conflict spillovers involving Israel, Hezbollah, Gulf shipping lanes, and great-power mediation. Any renewed escalation could quickly disrupt logistics, insurance availability, energy markets, and board-level risk appetite for trade, investment, and on-the-ground operations.

Opposition Crackdown, Rule-of-Law Risk

Escalating action against CHP politicians, mayors, and civil society is deepening concerns over judicial independence and policy predictability. The European Parliament has discussed sanctions on Turkish officials, raising reputational, governance, and long-term investment risks for companies requiring strong legal protections.

Private Sector Reform Drive

Cairo is pushing to attract $13-14 billion in annual FDI, expand private-sector participation, and reduce state dominance. Investors still view competitive neutrality, execution of reforms, and clearer market access conditions as decisive for new commitments and expansion plans.

China Controls Reshape Technology Trade

The U.S. tightened export-control rules to block Chinese firms from acquiring advanced chips through overseas affiliates, while scrutiny of Chinese participation in subsidized U.S. projects is rising. Semiconductor, electronics, and advanced manufacturing firms face stricter licensing, supplier vetting, and localization pressure.

UAE Trade Corridor Under Strain

Iran’s commercial dependence on Gulf re-export and finance channels, especially the UAE, is becoming more fragile. Tighter scrutiny of Iranian-linked businesses threatens access to consumer goods, machinery, pharmaceuticals and payment routes, increasing import costs and disrupting regional supply-chain workarounds.

Tourism Faces Cost And Policy Pressures

Tourism, worth up to 20% of GDP, is being hit by higher airfares, cancelled charter flights and weaker arrivals in some destinations. Simultaneously, Thailand plans to cut most visa-free stays from 60 to 30 days, tightening compliance expectations for travel-related businesses.

EU-China Trade Confrontation

The European Union is preparing stronger trade defenses against Chinese subsidies, overcapacity and market distortions, with retaliation from Beijing increasingly likely. A widening EU goods deficit of roughly €360 billion and debate over quotas, safeguards and anti-coercion tools raise exposure for exporters, manufacturers and investors.

War Damage and Economic Contraction

Conflict-related strikes and blockades have damaged petrochemical, steel and logistics infrastructure, pushing Iran toward severe contraction. Reports cite at least 1 million lost jobs, rial depreciation to about 1.75 million per dollar, and inflation near 85 percent, undermining operations.

India Trade Deal Rollout

The UK-India trade agreement enters into force on 15 July, liberalising 99% of UK tariffs and 90% of Indian tariffs. Businesses face new opportunities in goods, services, mobility and customs processes, with implications for sourcing, market entry and competitive positioning.

Tariff Regime Volatility Persists

Washington is rebuilding import barriers through Section 301 after courts struck down earlier tariffs, with proposed duties of 10% to 12.5% on roughly 60 countries. The legal uncertainty complicates pricing, sourcing, customs planning, and long-term investment decisions.

Energy security and shipping risk

Middle East conflict exposed South Korea’s import dependence, with roughly 90 percent of crude secured but shipping through Hormuz still sensitive. Businesses face ongoing exposure to higher fuel costs, freight volatility, petrochemical margin pressure and potential supply disruptions across industrial value chains.

Energy Security Under Strain

Taiwan’s power outlook is a growing business risk as AI, semiconductors, and data centers lift demand while LNG import dependence remains high. Recent disruption to Qatari gas and debate over nuclear restart highlight cost, resilience, and continuity concerns for industry.

AUKUS Deepens Strategic Integration

Expanded AUKUS infrastructure, including US weapons prepositioning in Victoria and major base upgrades, reinforces Australia’s strategic role in Indo-Pacific defence logistics. It may lift defence-related investment and procurement, while increasing exposure to regional security tensions and compliance requirements for critical suppliers.

China Exposure Drives Policy Pressure

Washington is using the USMCA review to reduce Chinese and broader Asian content in North American supply chains. Scrutiny is rising in autos, chemicals, pharmaceuticals, and medical devices, while Mexico’s own tariffs on some Asian vehicle imports show growing pressure to localize sourcing and tighten trade compliance.

High Interest Rate Persistence

Brazil’s Selic remains around 14.5%, while 2026 inflation expectations have risen to 5.11% and markets cut hopes for faster easing. Elevated rates tighten domestic demand, increase working-capital costs, and pressure leveraged sectors including retail, construction, logistics, and industrial expansion plans.