Regional Security Tensions and Military Threats

U.S. threats of military intervention, ongoing proxy conflicts, and the weakening of Iran’s regional alliances have heightened security risks. The potential for escalation jeopardizes cross-border trade, energy transit, and the safety of international personnel and assets.

Rial collapse, high inflation

The rial’s rapid depreciation to around 1.5–1.6 million per USD and inflation near 50% are destabilizing pricing, wages, and import capacity. Multiple exchange rates and subsidy changes amplify settlement risk, impair demand forecasting, and complicate repatriation and local sourcing.

De-dollarisation and local-currency settlement

Russian officials report near‑100% national‑currency use in trade with China and India and ~90% within the EAEU, reducing USD/EUR reliance. For foreign firms, FX convertibility, hedging, and repatriation complexity rise, especially where correspondent banking access is constrained.

Baht strength and financing conditions

The baht appreciated strongly in 2025 and stayed firm into 2026, pressuring export and tourism competitiveness while lowering import costs. With possible rate cuts but rising long-end yields, corporates face mixed funding conditions, FX hedging needs, and margin volatility.

Defense buildup, industrial mobilisation

Japan’s rapid defense expansion toward 2% of GDP is driving procurement, re-shoring of sensitive manufacturing, and looser defense-export rules. This increases opportunities in aerospace, cyber, shipbuilding and munitions supply chains, but raises compliance, security vetting and capacity-allocation pressures.

Supply Chain Realignment and China-Plus-One

Rising geopolitical tensions and global supply chain disruptions have accelerated India’s emergence as a preferred alternative to China. Multinationals are increasingly adopting a 'China-Plus-One' strategy, leveraging India’s scale, skilled workforce, and improving infrastructure for diversification and risk mitigation.

German Investment Shift: US to China

German direct investment in the US fell by 45% in 2025, while investment in China surged to over €7 billion. Uncertainty from US trade policy and pressure from Chinese authorities are prompting German firms to localize production and supply chains in China, affecting global business operations.

Korea semiconductor industrial policy reboot

A new Special Act creates a presidential commission, dedicated funding and cluster support to strengthen the entire chip supply chain. Regulatory streamlining and regional incentives can attract foreign suppliers, but unresolved labor flexibility debates may constrain rapid R&D and ramp-ups.

War economy, fiscal pressure, interventionism

Russia’s war economy features high state direction, widening deficits, and elevated inflation/interest rates (reported 16% policy rate). Authorities may raise taxes, impose administrative controls, and steer credit toward defense priorities, increasing payment delays, contract renegotiations, and operational unpredictability for remaining investors.

Defense procurement surge and controls

Large US-approved arms packages and sustained defense demand support Israel’s defense-industrial base but heighten regulatory sensitivity. Companies in dual-use, electronics, aviation, and logistics face tighter export-control, end-use, and supply-chain traceability requirements, plus potential delays from licensing and oversight.

Critical Minerals Supply Chain Realignment

Australia is rapidly expanding its critical minerals sector, including rare earths, lithium, gallium, and scandium, to reduce reliance on China and support allied supply chains. Strategic stockpiles and new mining projects are reshaping global supply chains, attracting major international investment and government backing.

Labor Reform: Forty-Hour Workweek

Mexico is phasing in a 40-hour workweek by 2030, with gradual reductions starting in 2026. The reform aims to improve productivity and worker welfare, but may increase costs for businesses, especially SMEs, and require enhanced labor inspection and compliance.

Russian oil exposure and sanctions risk

Trade talks with the US tie tariff relief to reduced Russian crude purchases; imports already fell to ~1.0–1.2 mbpd from 2.1–2.2 mbpd peaks. Energy procurement and shipping/insurance chains face heightened compliance and price volatility sensitivities.

ESG Regulation and Compliance Shift

Brazil is implementing robust ESG regulations, including mandatory sustainability reporting by 2026 and credit restrictions for companies linked to illegal deforestation. These measures are reshaping corporate governance, access to finance, and export eligibility, especially for land-intensive sectors.

Surge in Foreign Investment in Germany

Foreign direct investment in Germany more than doubled to €96 billion in 2025, surpassing German outbound investment for the first time since 2003. Political stability, EU market access, and legal certainty make Germany increasingly attractive for international investors, supporting growth and supply chain resilience.

Currency Stability and Market Growth

The Brazilian real appreciated 11.19% in 2025, while the Ibovespa index rose 33.7%, marking its best performance since 2016. Stable currency and booming equities enhance Brazil’s attractiveness for portfolio investment and international business expansion.

Logistics and Infrastructure Modernization

Mexico’s third-party logistics market is forecast to grow from $14.4 billion in 2024 to $26.8 billion by 2033, driven by nearshoring, e-commerce, and technology adoption. Investments in freight corridors, bonded warehouses, and customs efficiency are strengthening supply chain competitiveness.

Public-Private Partnerships Drive Infrastructure

Turkey has implemented 272 PPP projects worth $215 billion since 1986, including airports and bridges. The PPP model remains central to infrastructure, with a focus on sustainability, human-centered development, and attracting international financing.

Energy Transition and Fossil Fuel Policy

US energy policy is increasingly polarized, with federal calls to double oil output and expand LNG exports, while some states push renewables. This divergence creates uncertainty for energy-intensive industries and complicates long-term investment in both fossil fuels and green technologies.

Manufacturing and Chemicals Structural Weakness

Despite modest GDP growth, Germany’s manufacturing and chemicals sectors face persistent output declines, plant closures, and job losses. Global competition, high energy costs, and regulatory burdens threaten long-term competitiveness, requiring strategic adaptation for international investors.

Outbound investment screening expands

New U.S. outbound investment restrictions for semiconductors, quantum, and advanced AI create approval or notification burdens for cross-border deals and R&D. Companies must reassess Asia tech exposure, ring-fence sensitive IP, and build deal timelines around regulatory review risk.

Defense build-up reshapes industry

La hausse des crédits militaires (+6,5 à +6,7 Md€, budget armées ~57,2 Md€) accélère commandes (sous-marins, blindés, missiles) et renforce exigences de conformité, sécurité et souveraineté. Opportunités pour fournisseurs, mais arbitrages budgétaires pèsent sur autres programmes d’investissement.

Critical Minerals and Mining Ambitions

With $2.5 trillion in mineral reserves, Saudi Arabia is investing $110 billion to become a regional mining and processing hub. Strategic partnerships, especially with the US, aim to reduce supply chain dependence on China and position the Kingdom as a key player in global mineral supply chains.

Privatization and Infrastructure Modernization

The government is advancing privatization of key assets, including airports and state enterprises, through transparent, open bidding. These efforts aim to improve operational efficiency, attract foreign investment, and modernize infrastructure, with significant interest from Gulf and Turkish investors.

Macroeconomic Stability Amid Global Volatility

Despite global trade tensions and capital flow volatility, India’s external sector remains stable, with record exports and a strong services surplus. The rupee’s orderly depreciation and robust FDI inflows reflect underlying macroeconomic resilience, supporting long-term business confidence.

Foreign real estate ownership liberalization

New rules enabling foreign ownership of land (with limits in Makkah/Madinah) are lifting international demand for Saudi property and mixed-use developments. This improves investment entry options and collateralization, but requires careful title, zoning, and regulatory due diligence.

Supply Chain Disruptions from Conflict

Ukrainian drone and missile strikes on Russian refineries and logistics hubs in 2025 led to the lowest pipeline deliveries since 2010 and a 25% drop in energy income. Such disruptions threaten supply reliability for global partners and heighten operational risks.

Investment Climate Reforms Accelerate

Indonesia’s government has streamlined investment licensing through the OSS system and risk-based regulation, issuing 175 automatic permits in early 2026. These reforms improve investor confidence, reduce bureaucratic delays, and create a more predictable business environment.

Foreign Investment Remains Resilient

France saw an 11% rise in foreign investment decisions in 2025, supporting nearly 48,000 jobs. Key sectors include automotive, AI, and renewables. However, persistent political instability and high public debt could affect future attractiveness and project execution.

China-tech decoupling feedback loop

U.S. controls and tariffs are accelerating reciprocal Chinese policies to reduce reliance on U.S. chips and financial exposure. This dynamic increases regulatory fragmentation, raises substitution risk for U.S. technology vendors, and forces global firms to design products, data flows, and financing for bifurcated regimes.

Frozen assets, litigation, retaliation risk

Debate over using immobilized Russian sovereign assets to back Ukraine financing is intensifying, alongside Russia’s lawsuits against Euroclear seeking about $232bn. Businesses face heightened expropriation/retaliation risk, asset freezes, and legal uncertainty for custodial holdings, claims, and arbitration enforceability.

Regulatory Reforms for Foreign Investment

Sweeping reforms to business, visa, and property laws are opening more sectors to foreign ownership, simplifying bureaucracy, and enhancing expat residency options. These changes aim to boost FDI and position Thailand as Southeast Asia’s leading expat and investment destination.

Water treaty and climate constraints

Mexico committed to deliver at least 350,000 acre-feet annually to the U.S. under the 1944 treaty after tariff threats, highlighting climate-driven water stress. Manufacturers and agribusiness in northern basins face rising operational risk, potential rationing and stakeholder conflict over allocations.

Saudi Aramco’s Global Investment Drive

Aramco continues to secure international partnerships and invest in energy diversification, influencing global supply chains and capital flows. Its strategic moves, including stake acquisitions and cross-border ventures, impact energy markets and related industries worldwide.

Sectoral Gains in Chemicals, Textiles, IT, and Pharma

The India-EU trade deal and other FTAs immediately benefit Indian exporters in chemicals, textiles, metals, pharmaceuticals, and IT. Tariff eliminations and improved regulatory cooperation are expected to boost exports, employment, and integration into global value chains.

Energy Transition and Power Reliability

South Africa’s energy sector is undergoing a complex transition, with regulatory uncertainty slowing offshore oil and gas exploration and the rollout of renewables. Power supply remains fragile, impacting industrial output, investment planning, and long-term business operations.