Escalating Regional And Geopolitical Tensions

Recent Israeli and US airstrikes on Iranian infrastructure, coupled with threats of further military action, have heightened geopolitical risks. These tensions threaten supply chains, cross-border trade, and the stability of foreign investments in Iran and the wider region.

Energy Crisis And Industrial Distress

Chronic electricity shortages and soaring power costs have led to eased antitrust rules, allowing distressed industries to jointly negotiate for cheaper energy. Persistent supply disruptions and Eskom’s R105 billion municipal debt threaten manufacturing viability and investor sentiment.

Geopolitical Tensions Disrupt Trade

Escalating US–China and US–Venezuela tensions heighten global trade uncertainty, impacting Thai exports, energy prices, and supply chains. Businesses face increased logistics costs and market volatility, especially in energy-intensive and export-oriented sectors, requiring robust risk management and market diversification strategies.

Financial Market Reforms and Currency Stability

The government’s aggressive measures to curb capital outflows and strengthen the Korean won, including foreign reserve deployment and tax incentives for foreign investors, are restoring market confidence. These reforms are crucial for financial resilience and attracting long-term investment.

Energy Costs and Power Reliability

South Africa’s energy-intensive industries face existential threats from high electricity costs, despite recent improvements in Eskom’s stability. Regulatory changes now allow distressed sectors to collaborate on energy procurement, but power costs and supply reliability remain critical risks for manufacturing, mining, and export sectors.

Political Instability and Budget Deadlock

France faces acute political instability as the government struggles to pass the 2026 budget, risking no-confidence votes and potential snap elections. This uncertainty undermines investor confidence, complicates fiscal planning, and could affect France’s credit rating and business environment.

Infrastructure Investment Pipeline Expansion

India’s government has launched a Rs 17 lakh crore PPP project pipeline with 852 projects, spanning roads, power, ports, and railways. This initiative provides medium-term investment visibility, boosts private sector participation, and underpins India’s long-term competitiveness in trade and logistics.

IMF Conditionality and Fiscal Policy Shifts

Pakistan is negotiating with the IMF for relaxed fiscal targets to enable growth-oriented policies. The government seeks to lower power tariffs, reduce super taxes, and improve credit access for SMEs, but faces constraints from IMF-mandated austerity and structural reforms.

Defense Industry and Sanctions Dynamics

Turkey’s exclusion from the US F-35 program and ongoing defense industry sanctions affect technology transfers and procurement. Efforts to rejoin the program and possible return of Russian S-400 systems highlight ongoing risks for defense sector investments and international partnerships.

Critical Minerals and Rare Earths Race

Brazil is emerging as a strategic hub for critical minerals, including lithium and rare earths, amid global supply chain tensions. The EU and Brazil are advancing joint projects, while US-China rivalry intensifies competition for resources, impacting investment flows and industrial policy.

Vision 2030 Economic Reforms Advance

Saudi Arabia continues to implement Vision 2030 reforms, focusing on economic diversification, infrastructure megaprojects, and attracting foreign investment. These initiatives offer new opportunities but require careful navigation of evolving regulations and local partnership requirements.

Labor Market And Productivity Gains

Labor productivity increased by 6.8% in 2025, supported by workforce upskilling and digital transformation. Vietnam’s young, tech-savvy population underpins growth in manufacturing and services, but ongoing skills development and social security reforms are vital for sustainable competitiveness.

Israel’s Strategic Expansion in the Red Sea

Israel’s recognition of Somaliland and moves to secure maritime access in the Horn of Africa signal a major strategic shift. This enhances Israel’s security and logistics options but risks regional backlash, complicates relations with China, Turkey, and Arab states, and introduces new geopolitical uncertainties for international business operations.

Energy Transition and Security

South Korea's commitment to green energy and reducing fossil fuel dependence drives shifts in energy imports and infrastructure investments. This transition affects industrial costs and supply chains, while geopolitical risks in energy sourcing regions pose challenges to energy security and trade stability.

Semiconductor Industry Dominance

Taiwan’s TSMC holds over 70% global market share in advanced chip manufacturing, driving AI and tech supply chains. Its expansion in the US and record profits underscore Taiwan’s critical role, but also expose it to geopolitical risks and trade policy shifts.

China's Green Energy Push

China's aggressive investment in renewable energy and electric vehicles reshapes global commodity markets and supply chains. This presents opportunities for investors in green technologies but challenges traditional energy sectors.

Foreign Investment and Regulatory Reform

Thailand aims to attract high-quality FDI by streamlining investment approvals and reforming capital market regulations. Structural reforms, especially in digital assets and advanced manufacturing, are crucial to restoring competitiveness and investor confidence amid regional competition.

US Tariffs and Trade Uncertainty

Ongoing US tariffs of up to 50% on Indian goods, linked to Russian oil imports and stalled trade negotiations, are disrupting exports—especially textiles, gems, and leather. This uncertainty pressures supply chains, currency stability, and investment planning, compelling Indian exporters to diversify markets and production bases.

Cautious Federal Reserve Policy Outlook

The Federal Reserve, after cutting rates by 75 basis points in 2025, is expected to pause further easing in early 2026 due to persistent inflation and labor market weakness. This cautious stance affects global capital flows, borrowing costs, and currency markets, influencing international investment strategies.

Accelerating Foreign Direct Investment Inflows

Vietnam’s FDI surged 8.9% in 2025, reaching $23.6 billion, driven by high-tech manufacturing and green industries. Continued reforms and digital transformation are attracting global investors, but heavy reliance on foreign capital exposes Vietnam to external shocks and geopolitical risks.

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.

Regulatory Complexity and Reform Pressures

Businesses face mounting regulatory and bureaucratic hurdles, with high labor and energy costs eroding competitiveness. Calls for urgent reforms—especially in tax, labor, and energy policy—are intensifying as Germany’s government struggles to deliver effective change, impacting investment decisions and operational planning.

CUSMA Review and Tariff Uncertainty

The upcoming 2026 review of the US-Mexico-Canada Agreement (CUSMA) and ongoing U.S. tariff threats create significant uncertainty for Canadian trade. Tariff volatility and annual reviews could reshape supply chains, investment decisions, and export strategies for Canadian businesses.

Private Sector Empowerment and SOE Reform

Recent policy documents elevate the private sector as a primary growth engine, with large Vietnamese conglomerates encouraged to lead industrial projects. State-owned enterprises retain a guiding role but face pressure to innovate and improve efficiency, reshaping the business landscape for both domestic and foreign investors.

Environmental and Sustainability Pressures

Increasing focus on environmental regulations and sustainability practices affects manufacturing and export sectors. Compliance with global ESG standards is becoming critical for maintaining market access and corporate reputation in international markets.

EU and Denmark Strengthen Arctic Security

Denmark, with EU support, is investing billions in Arctic defense—new naval vessels, surveillance drones, and satellite capacity—to counter US and Russian ambitions. This military buildup affects logistics, shipping routes, and risk calculations for businesses operating in the region.

Labour Market Pressures and Unemployment

Unemployment remains elevated at 31.9%, with major retrenchments in manufacturing and automotive sectors. US tariffs and company closures threaten further job losses in 2026, intensifying social pressures and impacting consumer demand, with implications for both local and international businesses.

Technology Export Controls and Sanctions

Taiwan faces evolving export control regimes, especially for semiconductors and AI chips, amid US-China tech competition. New tariffs and sanctions, including US restrictions on certain AI chips, create compliance challenges and impact Taiwan’s global trade flows.

Trade Agreements Expansion

Vietnam is actively expanding its network of free trade agreements (FTAs), including the CPTPP and EVFTA. These agreements enhance market access, reduce tariffs, and attract foreign direct investment, positioning Vietnam as a strategic hub for manufacturing and export-oriented businesses.

Technological Innovation and Digitalization

Japan is advancing in digital transformation and innovation, particularly in AI, robotics, and 5G technologies. These developments enhance competitiveness but require substantial capital investment and adaptation by businesses, influencing international partnerships and technology transfer agreements.

Chronic Energy Crisis and High Tariffs

Pakistan’s power sector faces a Rs2.95 trillion cost burden in 2026, with industrial tariffs at 12.9 cents/kWh—over double China’s rates. High energy costs and unreliable supply undermine export competitiveness, disrupt supply chains, and deter foreign direct investment in manufacturing and services.

Supply Chain Disruptions from Conflict

Military operations and border closures, especially at the Rafah crossing, continue to disrupt supply chains, humanitarian aid, and cross-border trade. Restrictions and infrastructure damage complicate logistics for international companies operating in or through Israel.

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.

Labor Market Dynamics

Tight labor markets and evolving workforce expectations in the US are driving wage growth and labor shortages in key sectors. These trends impact operational costs and productivity, prompting businesses to invest in automation and workforce development programs.

Infrastructure Investment and Development

Significant government initiatives to upgrade transport, digital, and energy infrastructure aim to boost economic resilience and attract foreign direct investment. Improved infrastructure supports supply chain efficiency and regional connectivity, enhancing the UK’s appeal as a strategic business hub despite broader geopolitical uncertainties.

Structural Economic Reforms and Growth

Comprehensive reforms in fiscal, monetary, and supply-side policies have strengthened Turkey’s economic fundamentals. Infrastructure upgrades, improved reserve levels, and reduced external debt costs foster a more attractive climate for foreign direct investment and export-oriented operations.