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Mission Grey Daily Brief - July 25, 2024

Summary of the Global Situation for Businesses and Investors:

Global markets are experiencing heightened volatility as the US-China trade war escalates, with both sides imposing tariffs and restrictions. This has led to a slowdown in economic growth, particularly in Asia, and businesses are feeling the impact. Europe is facing its own challenges, with the UK's ongoing Brexit negotiations creating uncertainty. Tensions in the Middle East remain high, affecting oil prices and global energy markets. Meanwhile, Russia's aggressive posture towards Ukraine has raised concerns among investors, with potential implications for European security and energy supplies. Businesses and investors are navigating a complex and dynamic landscape, requiring careful strategic planning to mitigate risks and capitalize on emerging opportunities.

US-China Trade War:

The ongoing trade war between the US and China continues to dominate the global economic landscape. Both countries have imposed tariffs on billions of dollars' worth of each other's goods, disrupting supply chains and impacting businesses worldwide. While the US seeks to address its trade deficit and protect intellectual property rights, China is pushing back to maintain its economic growth and technological advancement. This conflict has already led to a slowdown in global trade and a decline in business investment, with no clear resolution in sight. Businesses with exposure to either market are facing tough decisions, and those with supply chains spanning both countries are particularly vulnerable.

Brexit Uncertainty:

The United Kingdom's impending exit from the European Union remains a key source of uncertainty for businesses, especially as the new deadline of October 31st approaches. The nature of the future relationship between the UK and the EU is still unclear, with potential implications for trade, regulation, and labor movement. A no-deal Brexit could result in significant disruption to supply chains and increased costs for businesses trading with or operating in the UK. While a last-minute deal cannot be ruled out, businesses are advised to prepare for potential challenges and consider contingency plans to mitigate risks.

Middle East Tensions:

Rising tensions in the Middle East, particularly between Iran and the US and its allies, are affecting global oil supplies and prices. The Strait of Hormuz, a vital chokepoint for oil exports, has become a flashpoint, with several incidents involving oil tankers and drone shoot-downs. This has contributed to volatility in energy markets and raised concerns about the security of global oil supplies. Businesses, especially in the energy and transportation sectors, should monitor the situation closely and prepare for potential disruptions. The impact could extend beyond the region, affecting global economic growth and investment sentiment.

Russia-Ukraine Conflict:

Russia's recent aggressive posture towards Ukraine has raised concerns among investors and businesses, particularly in Europe. Russia has been accused of providing military support to separatists in Eastern Ukraine and annexing Crimea, leading to international sanctions. The current tensions center around Russia's Nord Stream 2 pipeline project, which could increase Europe's energy dependence on Russia and potentially provide a tool for political leverage. Businesses should be aware of the potential for further sanctions on Russia, which could impact their operations and supply chains. Additionally, any escalation of tensions or conflict could have significant economic and security implications for the region.

Recommendations for Businesses and Investors:

Risks:

  • Supply Chain Disruptions: The US-China trade war and Brexit uncertainty pose significant risks to global supply chains, potentially increasing costs and causing delays.
  • Market Volatility: Volatile energy prices and global economic slowdown could impact revenue streams and investment plans.
  • Geopolitical Tensions: Rising tensions in the Middle East and between Russia and Ukraine create a volatile environment, affecting business operations and investor sentiment.
  • Regulatory Changes: Brexit and US-China trade tensions may lead to sudden regulatory changes, requiring businesses to adapt quickly.

Opportunities:

  • Diversification: Businesses can explore opportunities in other markets to diversify their supply chains and customer bases, reducing reliance on a single region.
  • Alternative Energy Sources: The focus on energy security and sustainability provides opportunities for investment in renewable energy sources and related infrastructure.
  • Regional Trade Agreements: With global trade tensions, regional trade blocs and agreements offer potential benefits for businesses operating within those regions.
  • Digital Transformation: Investing in digital technologies and supply chain management solutions can help businesses mitigate risks and improve efficiency.

Further Reading:

Themes around the World:

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Economic Volatility and Debt Burden

Pakistan's economy is characterized by high fiscal deficits, rising public debt, and inflationary pressures. The heavy reliance on external borrowing and IMF programs raises concerns about debt sustainability, affecting currency stability and increasing the cost of capital for businesses engaged in trade and investment.

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Strategic Role in Black Sea Security

Turkey is poised to lead a Black Sea naval security mission under Ukraine security guarantees, enhancing its influence in regional maritime trade and logistics. This role may reshape supply chain routes and offer new opportunities for infrastructure and reconstruction investment.

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Reshoring and Supply Chain Realignment

Driven by national security and tariff policy, the US is incentivizing reshoring and ‘friend-shoring’ of manufacturing. This has triggered global supply chain restructuring, with Southeast Asia and Mexico gaining, but also increased operational complexity and costs for multinational firms.

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Supply Chain Vulnerabilities Persist

Despite export diversification, Korea’s heavy reliance on semiconductors and advanced tech exposes supply chains to shocks from global demand swings, trade frictions, and geopolitical tensions. Businesses must prioritize resilience and technology leadership to mitigate risks.

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Persistent Export Decline and Trade Deficit

Pakistan’s exports fell by 20.4% in December 2025, marking the fifth consecutive month of decline. The trade deficit widened to $19.2 billion for July–December 2025, up 35% year-on-year. This structural weakness threatens external stability and growth.

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Regulatory Overhaul and NGO Restrictions

Israel’s sweeping regulatory changes in 2026 impose stringent requirements on foreign NGOs operating in Gaza and the West Bank, restricting aid and international staff. These measures heighten compliance risks and complicate humanitarian supply chains for global organizations.

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Asia’s Growing Role in Russian Trade

China and India now account for the majority of Russian energy exports, but only at steep discounts (up to 50%). This shift has not compensated for lost Western markets, and exposes Russian trade to new geopolitical and regulatory uncertainties.

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Regulatory and Governance Reforms

Ongoing reforms aimed at improving transparency and business climate are critical for attracting investment. However, implementation challenges and corruption concerns remain, affecting investor confidence and business operations.

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Humanitarian Aid Restrictions and NGO Ban

Israel’s sweeping ban on 37 international humanitarian organizations and new registration requirements have severely restricted aid flows to Gaza. This has heightened reputational and compliance risks for foreign companies and NGOs, and may impact supply chains relying on humanitarian access or local partners.

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Investment Decline and Industrial Stagnation

Russia’s investment activity is falling, with an 8.7% drop in machinery and equipment imports. Industrial modernization is stalling, and GDP growth has slowed to just 0.1%, signaling recession risks and diminishing prospects for foreign investors.

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Geopolitical Alignments and External Relations

Pakistan's strategic geopolitical position influences its trade and investment landscape. Relations with major powers and regional alliances impact foreign aid, trade agreements, and investment flows, shaping the broader economic environment for international businesses.

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Technological Innovation and R&D

Taiwan's focus on innovation and research in emerging technologies strengthens its position in global markets. Investment in R&D drives competitiveness but requires continuous support amid geopolitical and economic pressures.

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Sanctions, Export Controls, and Geopolitical Tensions

The UK’s involvement in enforcing sanctions, particularly against Russia and in coordination with the US, affects global supply chains and trade flows. Ongoing tensions and policy shifts in sanctions regimes require businesses to maintain robust compliance and risk management frameworks.

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Rising Non-Oil Private Sector Growth

Non-oil private sector activity continues to expand, supported by Vision 2030 reforms and strong domestic demand. The Riyad Bank PMI remains well above 50, with real GDP growth forecast at 4–4.6% in 2026, signaling robust opportunities for international investors in diversified sectors.

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US Sanctions and Economic Pressure

Ongoing US sanctions continue to severely restrict Iran's access to international financial systems and trade networks, complicating foreign investment and supply chain operations. These sanctions target key sectors such as oil exports and banking, increasing transaction costs and risks for international businesses engaging with Iran.

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Infrastructure Expansion and Urban Development

Major infrastructure projects, including transport and power grid upgrades, are driving economic growth and urban transformation. Hanoi’s record budget revenue and full disbursement of public investment funds highlight the government’s commitment to sustainable development and improved business environment.

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Infrastructure Development and Logistics

Major infrastructure projects, such as the Suez Canal expansion and new industrial zones, improve logistics efficiency and trade capacity. Enhanced infrastructure supports Egypt's role as a global trade nexus, benefiting multinational corporations and supply chain operations.

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Nuclear Program Escalation And Regional Threats

Iran is recalibrating its nuclear strategy, seeking missile-capable warheads and reportedly developing chemical and biological payloads. These actions heighten regional security risks, provoke international responses, and increase uncertainty for businesses dependent on Middle Eastern stability.

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Labor Market Dynamics and Workforce Skills

Turkey's young and growing workforce presents opportunities and challenges. Skill mismatches and labor market regulations impact productivity and operational costs, affecting sectors reliant on skilled labor and influencing decisions on automation and training investments.

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SME Vulnerability and Regulatory Shifts

SMEs, contributing 35% of GDP, face challenges from new trade regulations, sustainability rules, and limited access to technology. Support for digitalization, green finance, and regional integration is essential to strengthen SME resilience and global supply chain participation.

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Regional Geopolitical Tensions in Yemen

Saudi-UAE relations have deteriorated over Yemen, with Riyadh demanding UAE troop withdrawal and escalating military actions. This conflict increases regional risk, potentially impacting trade routes, investor sentiment, and supply chain stability for international businesses.

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Geopolitical Risks in East Asia

Rising military tensions over Taiwan and the Senkaku Islands, with Chinese naval activity and Japanese security commitments, increase the risk of regional conflict. This instability directly affects trade, investment flows, and the strategic calculus of multinational firms operating in Asia.

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Energy Costs and Industrial Competitiveness

High energy costs and unreliable infrastructure continue to undermine Pakistan’s industrial competitiveness. Policymakers are considering lowering power tariffs and improving credit access for SMEs to boost manufacturing and attract foreign direct investment, contingent on IMF approval.

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US-Venezuela Diplomatic Relations

The evolving diplomatic ties between the United States and Venezuela significantly influence trade policies and investment climates. Recent shifts toward dialogue or sanctions impact bilateral trade flows, regulatory frameworks, and investor confidence, affecting businesses engaged in the Venezuela sector within the US.

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Agricultural Import Controls and Supply Chains

France’s suspension of imports of certain South American fruits due to banned substances reflects a tightening of food safety and supply chain standards. This measure, pending EU approval, may disrupt agri-food supply chains and signals stricter enforcement of EU regulations for international exporters.

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Structural Labor and Property Market Challenges

High household debt (86.8% of GDP), labor shortages, and a fragile property market with unsold stock and tight credit constrain domestic demand and business expansion. Government stimulus and reforms are needed to address these structural weaknesses and support sustainable growth.

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Energy Sector Expansion Drives Investment

Brazil’s oil production is projected to reach 5.5 million barrels per day in 2026, positioning the country as a key global energy supplier. This expansion attracts foreign investment, enhances export revenues, and increases Brazil’s geopolitical influence in energy markets.

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Energy Infrastructure Expansion

Israel has approved major energy projects, including a 900-megawatt power plant near Jerusalem, to meet rising demand and support future data centers. These developments offer opportunities for foreign investment but are subject to long regulatory timelines and regional risks.

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Massive International Reconstruction Funding

A €682 billion support package over ten years is agreed for Ukraine’s recovery, including grants and loans. This funding will transform infrastructure, energy, and industry, presenting major opportunities and risks for global investors and supply chain operators.

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Sluggish Economic Growth and Fiscal Pressures

Britain’s economy continues to struggle with low growth, high unemployment, and persistent inflation. Fiscal vulnerabilities, including a £3 trillion national debt, are prompting cautious investment strategies and raising concerns about future tax and spending policies.

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Energy Supply Vulnerabilities

Ukraine's energy infrastructure remains fragile due to geopolitical tensions, affecting gas transit to Europe and domestic energy security. Disruptions in energy supply chains pose risks for industries reliant on stable energy, influencing investment decisions and trade flows.

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UK-EU Relationship and Brexit Reset

The UK is preparing legislation to align more closely with the EU in areas such as food standards, emissions trading, and electricity markets. This 'reset' could add £5.1bn to the UK economy, but faces political controversy over sovereignty and regulatory alignment, impacting trade and investment decisions.

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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.

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Escalating Western Sanctions Pressure

Western sanctions on Russia, especially targeting energy, finance, and technology, have intensified in 2025-2026. These measures have led to a 24% drop in oil and gas revenues and a 35% weekly loss in oil export income, severely constraining Russia’s budget and global trade integration.

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Indigenous Economic Participation

Growing emphasis on Indigenous economic empowerment is influencing business operations and investment frameworks. Policies promoting Indigenous-owned enterprises and partnerships enhance social license to operate and open new market opportunities, aligning with global ESG trends and stakeholder expectations.

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Defense Industry Expansion and NATO Relations

Turkey is rapidly expanding its defense sector, with over $7.1 billion in exports in 2024 and localization rates exceeding 80%. Ongoing disputes over F-35 and S-400 systems, and potential reintegration into NATO defense projects, directly impact foreign investment and technology transfer.