Mission Grey Daily Brief - May 28, 2025
Executive Summary
In the past 24 hours, global politics and business have been rocked by escalations on multiple fronts: record Russian drone strikes on Ukraine have increased geopolitical risk and prompted renewed calls for sanctions; the US-China trade war pauses (with a 90-day tariff truce) but leaves uncertainty reverberating through world supply chains; and financial markets reflect a growing shift in confidence away from traditional US-dollar-centered safe havens in response to turmoil in the Middle East. Meanwhile, businesses are responding to increasingly fragmented and politicized global trade with rapid scenario planning and reassessment of risk strategies. Underlying all these developments is a new era of transactional diplomacy and escalating complexity for international businesses, particularly those with exposure to China, Russia, or contested supply chains.
Analysis
Russian Escalation in Ukraine: Largest Drone Attacks, Fraying Patience with Moscow
The last 48 hours have seen Russia unleash the largest drone barrage since the start of its invasion, with “355 Shahed-type” drones and cruise missiles raining down on Ukrainian cities. This escalation comes amid stalled peace talks, growing US frustration with Moscow, and mounting calls from both sides of the Atlantic for intensified sanctions. While US President Trump publicly rebuked Putin as having “gone crazy,” European leaders have been quick to press for harsher action; in fact, bipartisan proposals in the US Senate aim to push “bone-crushing” new secondary sanctions that would target not just Russia but also any country facilitating Moscow’s war economy (with a proposed 500% tariff on Russian oil buyers)[Sanctions Updat...][Ukraine Says Hi...][Russia targets ...].
Notably, Europe is stepping up its own deterrence: Germany has deployed combat troops to Lithuania in a historic show of force, and the EU and UK have just expanded sanctions to blacklist more than 200 vessels of Russia’s shadow oil fleet and a slew of financial players involved in sanctions evasion[EU, UK Unveil F...][Russia sanction...]. This represents a significant tightening of the economic noose, increasing reputational and legal risks for companies with even indirect exposure to Russian supply chains or energy markets.
Meanwhile, the humanitarian consequences are devastating—as new US-backed aid distribution in Gaza struggles to keep up with needs, and UN agencies warn of disaster scenarios in Sudan and Myanmar[Ukraine Says Hi...][Latest News | 1...]. Together, these events are compounding global risk premia and demand a re-examination of exposure to autocratic states and conflict zones.
The US-China Tariff “Pause”: Relief or Temporary Respite?
Markets reacted with relief as the US and China agreed to a 90-day truce, suspending a portion of the tit-for-tat tariffs that reached as high as 145% on Chinese goods and 125% on US goods. These tariffs—enacted just weeks ago in an attempt to pressure Beijing on trade imbalances, intellectual property, and supply chain security—had sent shockwaves through global manufacturing and consumer goods sectors. The temporary agreement, which lowers tariffs to 30% for now and rolls back certain non-tariff retaliatory measures, offers much-needed breathing space to battered supply chains and importers. However, analysts caution that this is only a tactical retreat rather than a strategic resolution. Fundamental issues—forced tech transfer, state subsidies, and persistent IP violations—remain unaddressed, and this truce could collapse as quickly as it began if either party feels slighted[Joint Statement...][Trump has lost ...][Momentary relie...].
Nowhere is this fragile peace felt more keenly than in the consulting and supply chain services sector, where demand for scenario planning and risk mitigation has surged as American and multinational firms scramble to adapt to shifting tariff regimes and the risk of renewed escalation[Trump's tariffs...]. The resulting uncertainty has forced companies (especially in tech, electronics, consumer goods, and automotive) to seek alternatives, diversity suppliers, and consider new investments outside China—a trend that could have lasting structural impacts on the global trading system.
Middle East Volatility and the Flight from the Dollar
Geopolitical tensions in the Middle East ticked higher as rumors of an imminent Israeli strike on Iran’s nuclear sites sent safe-haven assets like gold, the Swiss franc, and Japanese yen soaring, while the US dollar failed to attract flows as it has in past crises. Brent crude oil jumped to a weekly high, reflecting market fears of a wider conflict. Analysts see these moves as evidence of declining confidence in the US’s role as global reserve currency—a direct consequence, in part, of recent aggressive US protectionist policies and erratic diplomatic maneuvers[Market’s red fl...].
Concurrently, President Trump’s Middle East tour resulted in massive business deals with Gulf states but has, in the eyes of many allies, sidelined traditional geopolitical priorities (notably support for Israel and human rights concerns) in favor of pure transactionalism[Indranil Banerj...]. The abandonment of prior US positions on regional conflicts, the sudden lifting of Syria sanctions, and overt support for autocratic “stability” have left many international investors uneasy—not just about ethics, but about long-term policy predictability.
Business Risks: Supply Chain and Regulatory Fragmentation
The era of dependable global supply chains and predictable consensus-based regulation is ending. Trade wars, regulatory divergence (especially in digital, environmental, and AI governance), and sanctions are creating new fault lines. The sheer number of global trade interventions—over 3,400 in 2024—exemplifies how risk management is now a core strategic function, not a back-office afterthought[Beyond the trad...]. Countries like India are emerging as important players in the new, fragmented order, offering diversified supply and digital talent, but also demanding more sophistication from multinational boards and CFOs in risk management and compliance.
Companies with exposure to autocratic regimes or sectors vulnerable to sanctions (energy, finance, technology) should expect further scrutiny, expanded due diligence requirements, and rising reputational risks. The ongoing expansion of EU, UK, and US measures against Russian assets, growing secondary sanctions, and the extraterritorial reach of many regimes mean that global businesses must review their counterparties carefully and avoid entanglements with corrupt, anti-democratic networks.
Conclusions
May 2025 finds the global business environment entering a phase of heightened instability and fragmentation. Major powers are doubling down on sanctions and tariffs as political tools. US-China trade relations remain a seesaw of confrontation and tactical truces, beset by unresolved structural tensions. Russia is escalating its destructive campaign in Ukraine even as international patience for engagement wears thin, with a new wave of transatlantic sanctions and actual military deployments to NATO’s eastern flank. Markets are signaling their loss of faith in the old safe havens, and transactionalism is undermining long-standing alliances and ethical frameworks.
For international businesses, the “new normal” means perpetual scenario planning, deepened due diligence, and a willingness to make hard choices about where to invest and who to trust as values-driven partners.
What further shifts could disrupt the fragile global order? Will tactical diplomatic deals mature into real progress, or will they only mask deeper fractures? And as the world slides into increased transactionalism, which countries or companies will manage to preserve both their competitive edge and their reputation for principled leadership?
Deep resilience—and a values-based approach—are more critical than ever for navigating the storm ahead, and Mission Grey will continue to equip you with the intelligence you need to succeed.
Further Reading:
Themes around the World:
Grupo México’s Strategic Moves
Grupo México's bid to acquire Banamex triggered sharp stock volatility, reflecting investor concerns over financial risks and integration challenges. The company maintains a strong balance sheet and plans to leverage credit lines without significant new debt. This acquisition could reshape Mexico's banking sector and influence investor confidence in large conglomerates.
Commodity Price Fluctuations and Resource Sector Impact
Commodity markets, particularly metals and energy, have seen significant price swings due to global trade tensions and geopolitical risks. These fluctuations affect Canadian resource companies' profitability, export revenues, and investment plans, influencing broader economic stability and trade balances.
Capital Market Liberalization
Saudi Arabia's Capital Market Authority is consulting on fully opening the Tadawul stock market to all non-resident foreign investors, removing prior restrictions. This liberalization aims to deepen liquidity, diversify investor base, and enhance global integration, supporting Vision 2030 goals. However, increased volatility and regulatory challenges are anticipated during this transition.
Currency Volatility and Won Depreciation Risks
The Korean won has experienced sustained weakness against the US dollar, exacerbated by US-China trade tensions and domestic political instability. The Bank of Korea has issued verbal interventions and is monitoring risks closely, as prolonged depreciation could increase import costs, inflation, and capital outflows, impacting investment and economic stability.
Economic Reform and Investment Climate
Egypt has implemented 60% of 300 investment climate reforms, including digitization, tax simplification, and infrastructure development. These reforms improve ease of doing business, reduce bureaucratic hurdles, and enhance transparency, fostering a more competitive environment that encourages foreign and domestic investment, critical for long-term economic resilience and trade facilitation.
Political Stability and Judicial Independence
The rejection of the case against opposition leader Özgür Özel provides temporary relief to Turkish markets but highlights ongoing concerns about authoritarianism, judicial interference, and political instability. These factors undermine investor confidence, risk social unrest, and affect the lira and equity markets, complicating Turkey's investment climate and economic recovery.
Industrial and Manufacturing Hub Development
The 'New Economic Corridor' initiative integrates localization, industry, mining, and export strategies to position Saudi Arabia as a global manufacturing hub. Investments in petrochemicals, pharmaceuticals, electronics, and microchips, supported by infrastructure and incentives, aim to attract high-value foreign investment and enhance supply chain resilience.
Renewable Energy Expansion and Energy Security
Turkey is rapidly expanding its renewable energy capacity, with solar and wind installations growing significantly. This diversification strengthens energy security, reduces fossil fuel import dependence, and aligns with Turkey's net-zero emissions target by 2053. The renewable sector's growth presents new investment opportunities and supports sustainable economic development.
Proposed Tariff Increases on Asian Imports
Mexico's government proposes raising tariffs up to 50% on nearly 1,500 products from China and other Asian countries, aiming to protect domestic industries amid US pressure. The plan faces criticism from China and risks undermining investor confidence. Congressional approval is delayed for further negotiations, with potential budgetary impacts and trade relations at stake.
Geopolitical Trade Tensions Impact
Renewed US-China trade tensions, particularly China's export restrictions on rare earths, have disrupted Australian markets and supply chains. These tensions increase uncertainty for exporters and investors, affecting commodity prices and sectoral performance. Australia's strategic partnerships and trade policies must navigate these geopolitical risks to maintain market access and economic stability.
Energy Security Vulnerabilities
Australia holds critically low fuel reserves, with only 28 days of petrol, diesel, and jet fuel in storage, failing to meet the International Energy Agency's 90-day stockpile requirement. This exposes the country to severe supply chain disruptions, threatening logistics, retail, and healthcare sectors. The reliance on imports and refinery closures heightens geopolitical and operational risks for businesses and national security.
Energy Sector Transition and North Sea Oil Uncertainty
The UK government’s shift towards greener energy policies introduces regulatory and fiscal pressures on North Sea oil and gas operations. Stricter environmental regulations and higher taxes challenge fossil fuel companies, while the government maintains a pragmatic stance on energy mix. This transition impacts investment decisions and the future viability of the UK’s traditional energy sector.
Geopolitical Trade Fragmentation Risks
South Africa faces economic vulnerability due to global trade fragmentation and rising US-China tensions. The country's neutrality amid competing trade blocs risks marginalization, threatening supply chain stability and export markets. Strategic inertia could hinder South Africa's ability to adapt, impacting industrial development and its role in global value chains.
Geopolitical Risk and Asset Diversification
Rising geopolitical tensions prompt investors and companies, especially in Asia, to diversify away from US exposure. Wealthy individuals seek alternatives to US banks, and firms pursue 'America plus 1' strategies to reduce dependence on the dollar and US markets, signaling a gradual fragmentation of the global economy with inflationary and operational risks.
Geopolitical Impact on Chinese Stock Markets
Geopolitical tensions and trade disputes have led to volatility and declines in Chinese equity markets, particularly affecting semiconductor and electric vehicle sectors. Foreign investor sentiment remains cautious amid policy uncertainties, capital outflows, and regulatory crackdowns, undermining market confidence and complicating China's economic recovery prospects.
Global Trade Uncertainty and Protectionism
Rising geopolitical tensions and protectionist measures globally are creating headwinds for trade growth. India's trade policy uncertainty has surged, impacting export dynamics. However, India’s robust domestic demand, structural reforms, and fiscal prudence help maintain economic momentum despite a fragile global trade environment.
Capital Market Integrity and Reform
Indonesia's Finance Minister demands stringent measures against stock price manipulation ('gorengan') to protect retail investors, especially younger demographics. Promised incentives for the stock exchange aim to foster a transparent, trustworthy capital market, crucial for attracting sustainable investment and supporting economic growth.
M&A Activity Decline and Domestic Investor Dominance
M&A deals in Brazil are projected to remain below pandemic-era records in 2025, reflecting a cautious investment environment amid high interest rates. Domestic investors dominate transactions, while foreign participation, including from China and the US, remains subdued, signaling shifts in capital flows and strategic investment patterns.
Stock Market Resilience Amid Conflict
Israel's stock market has shown remarkable growth despite two years of conflict, with the TA-125 index rising 81% since October 2023. Nearly 27% of continuously traded companies doubled their market value, led by defense, insurance, and banking sectors. This resilience signals strong investor confidence and potential for continued gains, influencing foreign investment and capital flows.
Indian Debt Market Dynamics and RBI Policies
India's bond market gains prominence with RBI's monetary easing, including a 100 bps repo rate cut in 2025, attracting foreign portfolio investments. Liquidity infusion measures and inclusion in global bond indices enhance market depth, while RBI's variable reverse repo rate auctions balance liquidity, supporting government borrowing and corporate fund-raising at lower costs.
Brexit Uncertainty and Trade Impact
Ongoing Brexit negotiations and the looming possibility of a no-deal Brexit continue to create significant uncertainty for UK markets. This affects investor confidence, disrupts trade flows, and pressures sectors like energy and technology. The UK government’s preparations for no-deal scenarios and stalled EU trade talks highlight risks to supply chains and cross-border commerce.
Trade Deficit and Tariff Pressures
Canada's merchandise trade deficit widened to $6.32 billion in August due to weakened exports and tariff impacts on metals, machinery, and forestry products. Tariffs are eroding competitiveness, especially in key sectors, complicating trade relations with the US and other partners, and posing risks to export-driven growth and supply chain stability.
South Korea-Germany Trade and Investment Diversification
Germany views South Korea as a strategic trade ally to diversify exposure away from China. Bilateral cooperation spans automotive, pharmaceuticals, and technology sectors, with joint R&D in e-mobility and hydrogen, enhancing supply chain resilience and opening new investment opportunities amid shifting global trade patterns.
Gulf Investment in Real Estate
Gulf investors increasingly view Egypt’s real estate market as a strategic gateway for growth, attracted by large-scale urban development projects and government incentives. This influx of capital supports infrastructure expansion and urbanization, creating opportunities in construction, hospitality, and retail sectors, which are vital for economic diversification and regional integration.
Investment Flows Favoring the US
Major financial executives affirm the US will continue to attract the majority of global investment flows, citing its deep, liquid markets and innovation leadership, particularly in AI. Despite concerns over government debt and trade tensions, the US remains a preferred destination compared to Europe and Asia, influencing global capital allocation strategies.
China’s Export Controls and Market Dominance
China’s tightening export restrictions on rare earths and critical minerals have heightened global supply chain vulnerabilities. Controlling over 80% of rare earth processing, China’s policies are viewed as geopolitical leverage, prompting Western nations to seek alternative sources and processing capabilities, with Australia positioned as a key counterbalance.
UK-Germany Trade Relations and Investment Optimism
Recent surveys indicate improving sentiment among German companies towards UK trade relations post-Brexit, with expectations of increased turnover and investment. Enhanced bilateral cooperation in security and defense, alongside calls for trade facilitation, signal opportunities for growth in future-oriented industries, though cautious optimism remains due to lingering regulatory and geopolitical uncertainties.
Foreign Portfolio Investor (FPI) Sentiment Shift
After a period of significant outflows, FPIs are showing signs of renewed interest in Indian equities, driven by macroeconomic stability and improving earnings visibility. Mid-cap stocks are particularly favored for reallocation due to attractive valuations and growth prospects, signaling potential for increased foreign capital inflows and market bullishness in the medium term.
Geopolitical Legal Pressures
International law and human rights concerns increasingly influence Israel's diplomatic and economic environment. Legal narratives shape global perceptions, leading to indirect sanctions, arms export restrictions, and reduced cooperation. These pressures complicate supply chains and necessitate strategic adjustments by businesses reliant on international partnerships and markets.
US-China Trade Tensions and Nearshoring
Renewed US-China trade tensions and potential tariff hikes create risks and opportunities for Mexico. While increased tariffs on Chinese imports could disrupt supply chains, Mexico stands to benefit from nearshoring as companies relocate manufacturing closer to the US market, especially in electronics, automotive, and steel sectors, enhancing Mexico's strategic role in North American supply chains.
Trade Tensions and Export Realignment
US-China trade tensions have redirected commodity flows, benefiting Brazilian exporters, particularly in soybeans and iron ore. Brazil is strengthening trade ties with China, expanding exports beyond commodities into manufacturing and technology sectors. However, global tariff uncertainties and protectionist policies pose risks to Brazil's trade-dependent economy.
Fiscal and Monetary Policy Challenges
Pakistan’s economic recovery is threatened by fiscal mismanagement, policy paralysis, and structural weaknesses. While inflation has moderated, risks remain from rising imports, fiscal slippages, and overdependence on remittances, necessitating productivity-led reforms to sustain growth.
Yen Depreciation and Currency Volatility
The Japanese yen has weakened to multi-decade lows against the US dollar amid expectations of continued fiscal stimulus and dovish monetary policy. This depreciation enhances export competitiveness but raises concerns about inflationary pressures, increased debt servicing costs, and potential intervention. Currency volatility impacts trade, investment flows, and supply chain costs.
Economic Resilience Amid Conflict
Despite two years of war, Israel's economy has demonstrated remarkable resilience, maintaining low unemployment, solid GDP growth, and fiscal stability. This robustness is underpinned by a dynamic tech sector, young workforce, and strong defense exports, positioning Israel to recover swiftly post-conflict and sustain its role as a regional economic leader.
Energy Market Transformation and Reorientation
Geopolitical tensions and sanctions have halved Russian gas supplies to Europe, prompting Russia to pivot its energy exports towards Asia. Despite challenges, Russia plans to maintain oil production levels within OPEC+ agreements, signaling a strategic shift in global energy markets with implications for supply security and investment flows.
US Government Shutdown Impact
The ongoing US government shutdown creates economic uncertainty, disrupts federal operations, and limits access to critical economic data. This undermines market confidence, complicates Federal Reserve policy decisions, and affects sectors dependent on government contracts, influencing investment and operational strategies.