Mission Grey Daily Brief - June 18, 2025
Executive Summary
The world’s business and political landscape shifted dramatically in the past 24 hours as escalating conflict between Israel and Iran spilled over to global markets, disrupted diplomatic efforts at the G7 Summit, and sharpened divisions among major powers. U.S. President Donald Trump’s abrupt exit from the G7 in Canada—amid bellicose warnings to Iran and strikingly pro-Russia rhetoric—has fueled uncertainty over American global leadership, impacted risk sentiment, and left world leaders scrambling to respond to overlapping crises. As military tensions intensified in the Middle East, financial markets recoiled, oil and gas prices remained volatile, and European and Gulf equities tumbled. Meanwhile, major diplomatic moves—from fresh sanctions on Russia to renewed US-EU debates on countering Chinese economic dominance—signaled a shifting world order and mounting geopolitical risk for international businesses.
Analysis
1. Israel-Iran Conflict: Market, Energy, and Security Risks Multiply
The fifth day of open warfare between Israel and Iran is now a major driver of global instability. President Trump’s call for unconditional Iranian surrender and public threats regarding Iran’s leadership, paired with Israeli strikes and mass civilian evacuations from Tehran, have deepened fears of escalation. Major European and Gulf stock indices fell sharply; the pan-European STOXX 600 dropped 0.8% while leading Middle Eastern indices also sank, revealing investor flight from risk and a rush to safe-haven assets such as U.S. Treasuries, which saw yields dip across the curve [Wall Street sli...][European shares...][Most Gulf marke...].
The energy sector is especially sensitive. Oil prices remain elevated and volatile, with industry leaders from Shell and TotalEnergies warning of serious supply risks if attacks should target key infrastructure. Subtle but real increases in European and Asian natural gas benchmarks reflect concerns over potential disruption, not only from physical attacks but also strategic moves such as a possible Iranian blockade of the Strait of Hormuz—a chokepoint for nearly a third of globally traded oil [Israel-Iran Con...][Top oil CEOs so...]. Corporate risk appetite is further shaken by the prospect of renewed sanctions or even state-backed cyberattacks targeting Western infrastructure.
If the conflict continues or widens, expect a pronounced inflationary impact from higher fuel prices and knock-on effects for global supply chains and consumer confidence across industries, from manufacturing to retail. Heightened volatility will remain the status quo. International investors and businesses would do well to monitor the situation closely, evaluate hedges on commodity exposure, and review geopolitical insurance and contingency strategies.
2. G7 Summit Disrupted: Transatlantic Tensions and Policy Gridlock
The G7 summit in Canada rapidly devolved from a planned forum on energy security and global economic cooperation to a dramatic showcase of divisions among the world’s wealthiest democracies. President Trump’s early departure—with much fanfare and confusion—left G7 partners attempting to show unity while fielding urgent questions about US reliability, transatlantic collective action, and responses to both the Middle East crisis and the Ukraine war [G7 leaders try ...][G7 Summit Wrap-...].
While the G7 managed to agree in principle that Iran should never acquire nuclear weapons and to call for a de-escalation in the Middle East, Trump's stance against further sanctions on Russia (contrary to the UK’s push for harsher measures) and his renewed trade war with new rounds of tariffs have sparked warnings from the leaders of Canada and Europe about threats to global market stability. The EU’s Ursula von der Leyen directly appealed for greater G7 unity in confronting China’s “economic blackmail” and rare earth dominance—an echo of longstanding U.S. concerns about supply chain vulnerabilities, and a harbinger of more aggressive Western policies to diversify away from Chinese and Russian control of strategic materials [Von der Leyen b...][G7 Summit Wrap-...].
Notably, the G7 discussions signaled both the urgency and deep-seated difficulty of aligning Western democracies on sanctions, trade, and diplomatic strategy at a time of cascading global risks. For international businesses, this persistent policy gridlock translates into greater regulatory uncertainty, wider swings in tariffs and non-tariff barriers, and increased complexity in cross-border planning.
3. Russia Diplomacy and the Shadow War Economy
While the world’s focus has shifted toward the Middle East, the Russia-Ukraine conflict and great power rivalry remain deeply interwoven with all major events. The UK announced a sweeping new set of sanctions aimed at “choking off” Russia’s war finances by targeting energy, finance, and the so-called “shadow fleet” used to evade existing oil price caps. However, Trump’s reluctance to escalate sanctions has created a visible split, with the US president arguing that “sanctions cost us a lot of money,” and preferring to wait on European action [Starmer tighten...].
For its part, Russia, facing sustained sanctions pressure, boasted that its trade with “friendly” non-aligned nations has grown by 50% in the past four years, with new transport routes and supply chains pointing toward Asia, Africa, and Latin America. The Kremlin is also hosting its influential St. Petersburg International Economic Forum this week, with delegations from Asia and the Global South as well as US business representatives. This dual track—deepening ties with autocratic and non-aligned markets while remaining an economic pariah in the West—underscores the bifurcation of the global economy and the rise of parallel blocs, with Russia and China promoting multipolarity as a counterweight to Western sanctions and policy leverage [Russia's trade ...][Putin to meet C...][US business rep...].
4. US-China Rivalry, Critical Supply Chains and “New China Shock” Concerns
At the same time, Western leaders sounded the alarm on China’s continued dominance of critical supply chains, particularly rare earth elements essential for high-tech manufacturing, EVs, and defense. In the wake of Beijing’s recent export restrictions on rare earths—which make up 60% of global supply and 90% of processing—European Commission President von der Leyen called for a robust G7 response to end dependence on potential “blackmail” and destabilizing market interventions by China [Von der Leyen b...].
These calls are being echoed by individual states: India, for example, is moving swiftly to ramp up domestic rare earth mining and production, aiming to cushion itself from future Chinese restrictions and secure its burgeoning EV sector [Rare Earths sup...].
For international firms, the stakes are clear: the risk of sudden, politically motivated disruption to the flow of critical inputs is rising. Companies urgently need strategies to diversify suppliers, consider “friend-shoring,” and plan for future bouts of export controls, tariffs, and retaliatory action—especially those with exposure to authoritarian regimes that have demonstrated a willingness to leverage market power for political ends.
Conclusions
The past 24 hours have made clear that the intersection of war, energy insecurity, and fracturing global alliances is now the principal threat to international business stability. The Israel-Iran escalation is a catalyst, not an outlier, amplifying existing global fault lines from Moscow to Beijing and exposing weaknesses in both the world’s diplomatic order and real-economy supply chains.
Risk is migrating quickly from the political to the commercial sphere: sanctions, tariffs, and resource disruptions are not just headlines—they are rapidly becoming balance sheet and supply chain realities. The credibility of collective Western action, especially in the face of assertive and authoritarian powers, directly informs market volatility and business confidence.
As democratic nations debate unity and action, autocratic regimes seek to use this window to strengthen their own positions and influence global realignments. International firms must now ask: Are we prepared for a world in which geopolitics—rather than economic efficiency—defines our access to energy, technology, and markets?
How robust are your contingency plans for a supply chain shock in critical inputs? Are your investment exposures over-weighted to high-risk, low-transparency, or corrupt regimes? And perhaps most importantly: Are you aligned with the values and resilience strategies needed to compete in—and help shape—the future of a multipolar, and much less predictable, global economy?
Further Reading:
Themes around the World:
Mineral and Coal Pricing Reforms
The Indonesian government removed mandatory benchmark price requirements for mineral and coal sales, allowing miners to price below government-set levels while maintaining levy calculations based on benchmarks. This reform responds to industry preferences for transparent, market-driven pricing indices, potentially enhancing competitiveness and investment attractiveness in the mining sector amid ongoing resource development projects.
Foreign Direct Investment Surge
Mexico experiences record-breaking foreign direct investment in 2025, tripling compared to the previous year. Despite some multinational withdrawals like GE Appliances, others such as L’Oréal and OData expand operations, signaling robust investor confidence and opportunities in manufacturing and digital infrastructure sectors.
Monetary Policy Easing Amid Inflation Decline
The Central Bank of Egypt cut key interest rates by 200 basis points in August 2025, marking the third cut this year. This move follows easing inflation (13.9% in July) and stronger economic growth (5.4% Q2 2025), aiming to stimulate investment and consumption while balancing inflation risks and external financing conditions.
Currency Depreciation Benefits Exporters
The weakening of the Japanese yen has bolstered export competitiveness, particularly benefiting automakers and industrial firms by increasing overseas revenue value. However, currency volatility introduces risks for import costs and inflation. This exchange rate environment influences corporate profitability, trade balances, and investment decisions in Japan's globalized economy.
Legal Risks for Businesses in Occupied Territories
Finnwatch warns companies operating in Israel and occupied territories face legal and ethical risks linked to alleged violations of international law and human rights abuses. Businesses may be implicated in complicity if due diligence is inadequate. This scrutiny could lead to reputational damage, legal challenges, and calls for divestment, impacting supply chains and investment decisions in the region.
US Tariffs and Trade Restrictions
US-imposed tariffs, notably a 50% tariff on Indian goods, reshape international trade relationships and supply chains. While some countries like India experience limited impact due to lower export dependence, tariffs drive realignments in global partnerships and market access, complicating long-term business planning and competitive positioning.
Economic Contraction and Stagnation
Germany's economy contracted by 0.3% in Q2 2025, revised down from 0.1%, signaling a deeper slowdown driven by declines in investment, manufacturing, and construction. Weak global demand, high energy costs, and US tariffs exacerbate stagnation risks, potentially delaying recovery until 2026. This prolonged stagnation threatens Germany's role as Eurozone growth engine, impacting regional trade and investment.
US Political Instability Impact
The United States has become a significant source of supply chain volatility due to frequent policy shifts, tariffs, export controls, and sanctions. These abrupt regulatory changes disrupt global supply chains, forcing businesses to adopt proactive legal and operational strategies to manage geopolitical risks and maintain resilience in an unpredictable trade environment.
Activist Investors Shake U.S. Business Landscape
Activist investors are increasingly influencing major U.S. corporations, prompting strategic reassessments amid economic and political uncertainties. Their actions can lead to operational shifts, governance changes, and market volatility, affecting corporate performance and investor confidence in a complex regulatory and geopolitical environment.
Iran's Currency Crisis
Iran's rial has plummeted to near-record lows amid fears of renewed sanctions and geopolitical tensions. The currency's depreciation exacerbates inflation and economic instability, complicating business operations and increasing costs for imports, thereby undermining investor confidence and disrupting supply chains reliant on stable currency exchange rates.
European Defense Sector Volatility
Following diplomatic meetings suggesting potential de-escalation, European defense stocks experienced notable declines as investors anticipated reduced military spending. This sector's performance serves as a barometer for conflict intensity and defense procurement trends, impacting investment strategies in defense manufacturing and related industries.
Social Unrest and Labor Market Pressures
Proposed austerity measures, including spending cuts and public holiday abolitions, have triggered widespread protests and strikes. Social unrest exacerbates political instability and may disrupt business operations and supply chains. Labor market tensions could delay reforms and dampen consumer and business confidence, affecting economic performance.
Statistical Revisions and Data Reliability Issues
Recent downward revisions of Germany's GDP data for 2023 and 2024 reveal significant uncertainties in economic measurement, partly due to pandemic, energy crisis, and geopolitical disruptions. These revisions challenge the reliability of official statistics used for policymaking and market analysis, increasing risks of misinformed decisions by investors, businesses, and government authorities.
Finance Minister Removal and Fiscal Concerns
The abrupt dismissal of Finance Minister Sri Mulyani Indrawati has unnerved investors due to fears of deteriorating fiscal discipline under President Prabowo's populist agenda. Her exit triggered rupiah depreciation, stock sell-offs, and concerns over widening budget deficits, raising questions about Indonesia's ability to maintain prudent fiscal policy and sustain investor trust in the medium term.
Political Instability Disrupts Supply Chains
Political instability and government changes, including in the U.S., have become persistent risks disrupting global supply chains. Sudden policy reversals, tariffs, export controls, and regulatory volatility create cost increases and compliance challenges, forcing companies to adopt proactive legal and operational strategies to build resilience in an unpredictable trade environment.
Geopolitical and Regulatory Risks in Tech Sector
South Korea faces potential trade clashes due to new digital trade legislation perceived as discriminatory against US tech firms, while Chinese tech companies remain less affected. This regulatory environment risks escalating tensions with the US, impacting technology investments and bilateral trade relations. The situation necessitates balancing domestic policy objectives with international trade commitments to avoid economic fallout.
Monetary Policy and Economic Stagnation Risks
Russia's central bank maintains high interest rates (up to 21%) to combat inflation, but this tight monetary policy risks tipping the economy into recession. Leading bankers warn that only significant rate cuts to around 12% could revive growth, as current rates suppress investment, corporate profits, and consumer demand, contributing to technical stagnation.
High Defense Spending and Economic Strain
Nearly 40% of Russia's federal budget is allocated to defense and national security, including war-related expenditures. This heavy fiscal burden strains public finances, reduces funds available for social services and infrastructure, and heightens economic vulnerabilities amid prolonged conflict and sanctions.
Rising Global Bond Yields Impact
Surging global bond yields, including Australia’s 30-year bonds nearing 5.2%, have pressured equity markets and increased borrowing costs. This dynamic dampens share valuations and corporate profitability, leading to significant market sell-offs. Investors face heightened volatility, influencing capital allocation decisions and cost of capital for Australian businesses.
Finance Minister Removal and Fiscal Concerns
The abrupt dismissal of Finance Minister Sri Mulyani Indrawati has unsettled investors due to fears of eroding fiscal discipline amid President Prabowo's populist spending agenda. This move has led to rupiah depreciation, stock market declines, and concerns over widening deficits, potentially undermining Indonesia's fiscal credibility and deterring foreign capital.
Robust Foreign Investment Inflows
Egypt ranks 9th globally and 1st in Africa for investment, attracting $46.1bn in FDI during 2023/2024. This influx is driven by Egypt's large labor force, strategic location, competitive tax rates, and trade agreements with 70 countries. The Suez Canal Economic Zone has attracted $10.2bn in investments, enhancing Egypt's position as a regional industrial and logistics hub.
Impact on ASEAN Regional Stability
Indonesia's internal instability poses risks to ASEAN's regional unity, democratic values, and economic growth. As the bloc's largest economy and stabilizing force, Indonesia's unrest threatens to undermine ASEAN's reputation, disrupt supply chains, and deter foreign investment, potentially emboldening authoritarian regimes and weakening democratic progress across Southeast Asia.
Geopolitical Risks Impacting Credit Ratings
Israel's sovereign credit rating was downgraded by Moody's due to perceived political risks, despite strong economic performance and growth. This politicization of financial assessments raises borrowing costs, restricts institutional investment, and undermines market confidence, posing challenges for Israel's international financial reputation and access to capital markets.
Iran's Strategic Pivot East
Iran is increasingly relying on strategic partnerships with China and Russia to counter Western sanctions and diplomatic isolation. While these alliances provide diplomatic support and economic lifelines, they are transactional and limited, with Beijing and Moscow cautious about risking global interests, impacting Iran's ability to mitigate sanctions effects.
Geopolitical Events and Market Volatility
Geopolitical tensions, especially in the Middle East, cause short-term market shocks but often lead to rapid recoveries. While events like Israel's strikes on Iran caused immediate stock declines, markets typically rebound within months. Investors should view such disruptions as transient, with long-term buying opportunities arising from geopolitical-induced market dips.
Economic Performance and Growth Prospects
Brazil's economy grew 0.4% in Q2 2025, driven by services and extractive industries, despite slowing from Q1. Household consumption remains resilient, supported by government measures, while investments face headwinds from high borrowing costs. The medium-term outlook is cautious, with growth projections around 2.2-2.5%, amid domestic fiscal challenges and external trade tensions.
U.S. Tariffs Impact on Trade and Investment
The U.S. has imposed tariffs, notably a 50% tariff on Indian imports, affecting trade dynamics and prompting shifts in alliances. While some countries like India pivot towards China, U.S. tariffs increase costs for American consumers and businesses, disrupt supply chains, and create uncertainty for global trade and investment decisions.
Sanctions Targeting Russian Support Networks
Ukraine, in coordination with the UK, has imposed sanctions on individuals and companies supporting Russia's defense, energy, and shadow fleet sectors. These measures aim to disrupt Russia's military-industrial capabilities and economic resilience, affecting cross-border trade and complicating business operations involving sanctioned entities, thereby influencing regional economic dynamics.
Trade Policy and Tariff Adjustments
Mexico faces heightened trade tensions as the US imposes new tariffs, including a 50% tariff on Indian imports and potential restrictions on Chinese technology exports. Mexico is also engaged in trade talks with Brazil and plans to raise tariffs on Chinese goods. These developments could affect Mexico's trade flows, supply chains, and competitiveness in global markets.
Canadian Stock Market Performance and Investment Trends
The Toronto Stock Exchange has shown resilience with near-record highs, driven by strong earnings in financials, materials, and energy sectors. Despite geopolitical uncertainties, Canadian equities attract investor interest, including significant cross-border investments, reflecting confidence in Canada's economic fundamentals and sectoral strengths.
Volatility in Indian Financial Markets
US tariff announcements and fiscal policy changes have increased volatility in Indian equity, bond, and currency markets. Rising bond yields and rupee fluctuations reflect investor uncertainty, while domestic mutual funds and insurers provide offsetting support. Market dynamics remain sensitive to global trade developments and domestic economic indicators.
Retail Sales Decline and Consumer Uncertainty
German retail sales fell sharply by 1.5% in July 2025, exceeding expectations and signaling weakening consumer demand. This decline clouds consumption outlook for Q3, reflecting cautious household spending amid inflationary pressures and economic uncertainty, which could further constrain domestic growth momentum.
Federal Budget and Infrastructure Investment Plans
Prime Minister Mark Carney's upcoming budget aims to balance austerity with new investments, including major infrastructure projects and increased defense spending. These initiatives are designed to catalyze private investment and support economic growth but may also introduce fiscal constraints affecting business operations and public-private partnerships.
Energy Sector Challenges and Opportunities
Mexico's energy sector faces structural challenges, including heavy reliance on US natural gas imports and limited foreign investment in oil fields. Government policies prioritize energy sovereignty but risk underinvestment. Renewable energy projects and geothermal concessions signal diversification efforts, affecting long-term energy supply stability and investment attractiveness.
Banking Sector Resilience Amid Trade Tensions
Canada's major banks, including Royal Bank of Canada, Bank of Montreal, and Bank of Nova Scotia, have reported robust earnings despite tariff-related risks. Smaller-than-expected loan loss provisions and easing trade tensions have bolstered investor confidence, supporting the TSX index. The banking sector's resilience is critical for maintaining financial stability and facilitating investment in uncertain geopolitical climates.
Geopolitical Impact on Energy Markets
Ukraine's intensified attacks on Russian energy infrastructure have disrupted crude supplies, causing volatility in global oil prices. These strikes threaten European energy security, prompting calls for supply guarantees. Continued conflict risks further energy shortages and price spikes, affecting global supply chains and investment in energy sectors.