• • • The ceasefire is between the US and Iran and is not a regional peace —ĚýIsrael launched its heaviest strikes yet on Lebanon within hours of the announced deal. Iran hit oil infrastructure in Kuwait, the UAE, Bahrain, and Saudi Arabia — including the East-West Pipeline, the primary route for bypassing the Strait of Hormuz. Companies planning around a return to normal should instead plan around the idea that the war has narrowed, not ended.

    • If the disruption stays within one quarter, the economic damage is painful but reversible — The Dallas Fed projects WTI oil at roughly $98 per barrel with a modest GDP hit in a short-closure scenario. The catastrophic scenario — WTI above $132 with sustained negative growth — requires the closure of the war to drag past Q2. Every week the ceasefire holds improves the odds, but Iran’s strike on the Saudi bypass pipeline complicates even the optimistic timeline.

    • Iran may have stumbled into the most lucrative chokepoint tax in modern history — At conservative estimates, transit fees charged for traversing the Strait of Hormuz could generate $40 billion to $50 billion for Iran annually, or roughly 10% to 15% of Iran’s pre-war GDP — all at near-zero operating cost. That revenue stream inverts Tehran’s incentives. Indeed, keeping the toll system in place may now be worth more than restoring free transit.

On April 7, less than two hours before a self-imposed deadline that threatened the destruction of Iran’s civilian infrastructure, President Donald J. Trump announced a two-week ceasefire in the war in Iran that began on the last day of February and continued over 38 days of sustained air strikes by the Unites States and Israel. In turn, Iran carried out retaliatory attacks across over a dozen countries and forced the effective closure of the Strait of Hormuz.

With the ceasefire, all that has paused. Yet, the question every boardroom, general counsel’s office, and procurement team is asking right now is simple: How can I plan around this?

The honest answer is, not yet — and the first 24 hours have already shown why.

A fragile, but functional peace

The ceasefire is remarkably thin, and it’s based on three operative clauses: i) the US and Israel halt strikes on Iran; ii) Iran halts retaliatory attacks on the US and Israel; and iii) Iran allows “safe passage” through the Strait of Hormuz. Everything else — from nuclear terms, sanctions, reconstruction, and the legal status of Hormuz transit — has been punted to negotiations in Islamabad beginning April 10, with Pakistan mediating.

With the ceasefire, the question every boardroom, general counsel’s office, and procurement team is asking right now is simple: “How can I plan around this?”

However, what the ceasefire covers matters less than what it doesn’t. Within hours of the announcement, Israel launched its heaviest strikes yet on Lebanon, and Iran warned it would withdraw from the ceasefire if attacks on Lebanon continue. Meanwhile, Kuwait, the UAE, and Bahrain all reported fresh Iranian missile and drone strikes targeting oil, power, and desalination infrastructure after the ceasefire was in place. Most critically, Iran struck Saudi Arabia’s East-West Pipeline, the main route by which Gulf producers have been rerouting oil to bypass the blockaded strait.

That pipeline strike should command attention in every supply chain and energy risk briefing this week because it signals how shaky the agreement is, and that Iran remains a long-term threat to vital infrastructure across the region.

For companies operating in or sourcing from the Gulf, the practical implications are immediate. This is not a ceasefire that restores pre-war operating conditions; rather it is a bilateral pause between two belligerents while the regional war continues around them. Insurance premiums, shipping risk assessments, and supply chain contingency plans should reflect that distinction until there is a meaningful shift.

What does this mean for the next two weeks?

Both sides are claiming victory — and increasingly, claiming different deals. Trump called Iran’s 10-point proposal “a workable basis on which to negotiate”; and Iran’s Supreme National Security Council called the ceasefire a “crushing defeat” for Washington. The White House now says the 10-point plan Iran is publicly circulating differs from the terms that were actually negotiated for the ceasefire. Tehran, meanwhile, says there is no deal at all if Lebanon isn’t included — a condition the US has not acknowledged. And of course, the Strait of Hormuz remains closed.

These are not the hallmarks of a stable agreement; but they may be the hallmarks of a durable one. The deal is thin enough so that each side can brief its domestic audience on a different story, and as long as neither is forced to reconcile those stories publicly, the pause holds.

And the incentives to keep talking are asymmetric but real. The US has watched gas prices surge past $4 nationally as domestic support for the war — which started at levels best described as in a hole — continued to drop even further. Goldman Sachs raised its recession probability to 30% and JPMorgan to 35%, and every day the strait stays closed pushes those numbers higher. The administration needs the global economy to exhale and needs distance itself from a war so it can focus on other priorities, including an already difficult midterm election cycle.

With the ceasefire, all that has paused. Yet, the question every boardroom, general counsel’s office, and procurement team is asking right now is simple: How can I plan around this?

Iran, for its part, wants the bombing to stop. Its conventional navy has been functionally destroyed, its air defenses are highly degraded, its nuclear facilities have sustained severe damage, and its cities, bridges, and transportation networks have been hit repeatedly. The regime survived and arguably emerged with greater domestic legitimacy than it had before the war, but the physical toll is mounting. Tehran wants the strikes to stop so it can claim victory by survival without incurring any more costs.

This mutual exhaustion is the load-bearing structure of the ceasefire. If the ceasefire holds for 72 hours (as I think it might), and if the strait begins opening to escorted traffic by Friday as Iranian officials have signaled, and if neither side finds a reason to walk away before the Islamabad talks convene, then the ceasefire will likely be extended. Not because the underlying disputes get resolved, but because the cost of resuming hostilities exceeds the cost of continuing to talk. Expect a rolling series of extensions, probably 30 to 45 days at a time, that resolve nothing while letting global markets gradually stabilize.

As we wrote earlier this month, if the disruption remains limited to roughly one quarter, the oil price shock is painful but reversible, ugly, but manageable. And every week the ceasefire holds pushes the trajectory toward the manageable scenario.

What happens after the ceasefire?

Again, if the ceasefire holds, we then have to start thinking about how this conflict resolves. Not surprisingly, this is where it gets uncomfortable.

The conventional assumption in Washington and in global markets is that the Strait of Hormuz will return to normal once the fighting stops. That assumption underestimates what Iran has built.

Iran’s parliament is working to pass a Strait of Hormuz Management Plan, codifying its claimed sovereignty over strait transit and establishing a legal framework for collecting toll fees. Media reports indicate Iran has been charging vessels between $1 million and $2 million per transit and is planning to keep charging those tolls for all ships as the strait reopens. So, at $1 million per ship, and with up to 135 transits per day, 365 days a year, that’s about $40 billion to $50 billion in annual revenue for Iran, or up to 15% of Iran’s pre-war GDP. All at an operating cost that approaches zero.

Iran didn’t enter this war planning to build the most lucrative chokepoint tax in modern history, but it may have stumbled into exactly that.

Compare that to Iran’s oil sector, which generated approximately $53 billion annually in 2022 and 2023, required massive capital investment and maintenance, and was subject to constant disruption. The toll revenue is comparable in scale, dramatically cheaper to operate, and immune to sanctions. If the final number is even a fraction of this, it’s still a massive financial shot in the arm for Iran that could become a far greater advantage than the damage to capital that the war has inflicted upon the state.

Iran didn’t enter this war planning to build the most lucrative chokepoint tax in modern history, but it may have stumbled into exactly that.

Of course, this changes the structural incentives around the Strait of Hormuz in ways most analysts haven’t fully absorbed. A permanent toll system gives Iran a revenue base to rebuild the military assets it lost, reduce its dependence on oil exports, and fund domestic investment that could blunt future protest movements. The regime’s cost-benefit calculus has inverted: Keeping the toll operational in place may now be worth more than restoring the pre-war status quo.

For the US and Israel, the only way to dismantle this arrangement is by force and the last 38 days demonstrated the limits of that approach. The US achieved air and naval superiority, destroyed Iran’s conventional military, and killed the supreme leader. None of it was enough to compel capitulation, and in fact, may not have even come close. A second campaign faces the same likely result, against a population now unified by the experience of surviving the first one.

The war didn’t just disrupt global trade. It may have permanently repriced the most important shipping lane on Earth — and left every piece of energy infrastructure in the Gulf more vulnerable than it was before the first air strike landed.

Please add your voice to ¶¶ŇőłÉÄę’ flagship , a global study exploring how the professional landscape continues to change.Ěý

Key takeaways:

• • • Q2 is a wound that heals if the war stops — Oil spikes, inflation revisions, and supply disruptions are painful but mostly reversible in a short-war scenario. The exception is insurance and risk premiums for Gulf maritime transit, which are permanently repriced.

    • Q3 is a wound that scars — Sustained oil at $130 per barrel changes household and business behavior in ways that don’t snap back. Recession probability crosses the coin-flip threshold and supply chain disruptions cascade into industries far from the Gulf.

    • Q4 is a different body — Even if the war ends, the global economy has rebuilt itself around the disruption. Trade routes, supplier relationships, and risk models have been permanently rewired, especially if there is nothing structural to prevent the Strait from closing again.

This is the second of a two-part series on the impact of the war with Iran as the conflict continues. In this part, we’ll walk through what a quarter-by-quarter economic scenario would look like if the war continues.

Previously, we made the case that the US-Iran war is unlikely to end quickly. The regime hasn’t collapsed, the asymmetric force controlling the Strait of Hormuz is nowhere near neutralized, and diplomacy seems dead on arrival. Most significantly, the United States military is escalating, not winding down.

While the first part of this series was about the military and diplomatic picture, this piece is about your balance sheet.

What follows is a quarter-by-quarter map of what a prolonged conflict means for the global economy, charted from now through Christmas 2026. We’ll cover how oil, supply chains, GDP forecasts will be revised in real time, and how disruptions that look temporary in Q2 could trigger a permanent rewiring of how the global economy moves goods, prices risk, and sources critical inputs.

Even if your company doesn’t import a single barrel of Gulf crude, you could still get hit by this. Indeed, if you’re plugged into the global economy like the rest of us, you’re going on this ride.

Q2 2026 (April–June): The wound that heals

If the war ends by the close of the second quarter on June 30, most of the damage is reversible — painful, but reversible.

Brent crude is up about 60% since before the start of the war when it was roughly $70 per barrel; and Capital Economics , prices could fall back toward $65 by year-end. The interim outlook from the Organisation for Economic Co-operation and Development (OECD) now to be 4.2% for 2026, up sharply from 2.8%, assuming energy disruptions ease by mid-year. If that assumption holds true, it’s likely we’ll be able to muddle through the pain.

Even in the most optimistic scenario, however, Q2 introduces disruptions beyond oil that most people aren’t tracking. The Gulf supplies roughly 45% of global sulfur, and Qatar produces around one-third of the world’s helium, which is essential for semiconductor manufacturing. Further, Qatar’s liquified natural gas (LNG) production was significantly damaged by Iranian strikes.

Even in the most optimistic scenario, however, Q2 introduces disruptions beyond oil that most people aren’t tracking.

Further disruptions in fertilizer supply chains could delay spring planting, which could ripple into agricultural yields well into 2027. These effects don’t snap back the moment oil flow normalizes; they have their own timelines.

And here’s the one thing that doesn’t reverse even in the best case — risk premiums. The Strait of Hormuz was priced as a chokepoint that would never actually close. So when it did, that repricing is permanent and will be felt across the world as risk around other too important to fail chokepoints is itself reevaluated and priced higher.

Q3 2026 (July–September): The wound that scars

If a Q2 end to the war represents a recoverable spike, a Q3 end is where the word structural starts showing up in the discussion.

Capital Economics models Brent at roughly $130 per barrel — or roughly 14% higher than where it is now — in a prolonged scenario. At those prices, the damage stops being abstract. And Moody’s Analytics chief economist Mark Zandi estimates that every sustained $10-per-barrel increase . At $130 (nearly double pre-war levels) that’s approaching $2,700 per family. That is the kind of money that changes behavior.

In this case, Zandi says, especially if the cost of oil stays elevated for months — and by Q3, it would have. Moody’s recession probability model was pushing 50% in late-March when oil was $108 per barrel. At $130, the math speaks for itself.

Again, in this scenario, the damage fans out beyond energy. Fertilizer shortages hit crop yields, and helium disruptions cascade into semiconductors, automotive, and medical devices. The potential impact on AI-related manufacturing alone could spook investors already primed to see AI as a bubble. Capital Economics projects Eurozone growth at 0.5% and Chinese growth below 3%. Emerging markets could face forced rate hikes that deepen their own recessions.

This is the quarter in which contingency plans become operating assumptions. The question is no longer When does this go back to normal? —Ěýrather the question is whether normal is coming back at all.

Q4 2026 and beyond: The different body

Here’s what most forecasts don’t capture about a war that continues passed Q4: It almost doesn’t matter whether the war is still active or not. The damage has changed shape, and it’s no longer about what the conflict is doing to the global economy. Instead, it’s about what the global economy has done to itself in response.

Companies that spent Q2 and Q3 diversifying away from Gulf suppliers have now spent real money building alternatives. They are not going back to their pervious pathways even if there is a ceasefire. The sunk costs make the reversal unthinkable, and the memory of this conflict makes it irrational. No supply chain director is walking into a boardroom to recommend re-concentrating risk in a chokepoint that closed once and might close again.

The prudent approach for companies remains clear. They should plan for the war to last into at least Q2, probably Q3, with structural effects persisting beyond.

Because, of course, it could close again. If Iran emerges weakened but intact, which is the most likely outcome per multiple intelligence assessments, the result is a hostile state with every incentive to reconstitute its asymmetric capabilities the moment the pressure lifts.

Companies are thus going to reroute their future supplies around the Strait rather than through it. High oil prices and the potential for global shortage will also further accelerate green energy initiatives or alternate fuel sources across the globe as oil security reenters geopolitical calculations. Most importantly, every organization’s supply chain will need a reevaluation in light of an increasingly dangerous world, with expensive secondary supply chains becoming more a necessity than a luxury.

That’s the real legacy of a war continuing past the end of this year. Not oil prices on any given day or even insurance premiums, but the permanent repricing of an assumption. The war didn’t just disrupt the flow of goods through the Strait of Hormuz, it broke the premise that some geographies were too big to fail and would be protected and kept open. Once that premise is now broken so thoroughly companies will need to reevaluate whether the concentration of risk in individual areas is a luxury they can afford. Many will find the answer to be no, resulting in an increased push to diversify risk away from single points of failure.

The planning imperative

Fortunately, the best-case scenario remains possible. However, it requires Iran accepting terms it has publicly rejected as existential, its navy being neutralized despite retaining significant asymmetric combat capability, a coalition materializing from countries that have refused to send warships, and mine-clearance operations succeeding with the deck stacked against them. Only then, we’ll see if civilian traffic is willing to risk billions of dollars that the clean-up job was done right. Each is possible, but the odds remain slim.

The prudent approach for companies remains clear. They should plan for the war to last into at least Q2, probably Q3, with structural effects persisting beyond. They should model energy prices at between $120 and $150 per barrel, not $70. The smart companies are the ones building optionality now because the cost of flexibility is far lower than the cost of being caught flat-footed in September.

Four weeks ago, the assumption was that the Strait of Hormuz was too important to close. However, it did, and the assumption that it will reopen quickly deserves the same scrutiny.

You can find out more about theĚýgeopolitical and economic situation in 2026Ěýhere

Key takeaways:

• • • Only IEEPA‑based tariffs are up for refund — Refunds will flow electronically to importers of record through ACE, the government’s digital import/export system, but only once CBP’s process is finalized.

    • Liquidation and protest timelines are now critical — An organization’s tax concepts that directly influence which entries are eligible and how long companies have to protect claims.

    • Tax functions must quickly coordinate with other corporate functions — In-house tax teams need to coordinate with their organization’s trade, procurement, and accounting functions to gather data, assert entitlement, and get the financial reporting right on any tariff refunds.

WASHINGTON, DC — When the United States Supreme Court issued its much-anticipated ruling on President Donald J. Trump’s authority to impose mass tariffs under the International Emergency Economic Powers Act (IEEPA) in February it set the stage for what it to come.

The Court ruled the president did not have authority under IEEPA to impose the tariffs that generated an estimated $163 billion of revenue in 2025. In response, the Court of International Trade (CIT) issued a ruling in requiring the U.S. Customs and Border Protection (CBP) to issue refunds on IEEPA duties for entries that have not gone final. That order, however, is currently suspended while CBP designs the refund process and the government considers an appeal.

AtĚýthe recent , tax experts discussed what this ruling means for corporate tax departments, outline what is and isn’t a consideration for refunds and the steps necessary to apply for refunds.

As panelists explained, the key issue for tax departments is that only IEEPA tariffs are in scope for refund — many other tariffs remain firmly in place. For example, on steel, aluminum, and copper; Section 301 tariffs on certain Chinese-origin goods; and new of 10% to 15% on most imports still apply and will continue to shape effective duty rates and supply chain costs.

So, which entities can actually get their money back?

Legally, CBP will send refunds only to the importer of record, and only electronically through the government’s digital import/export system, known as the Automated Commercial Environment (ACE) system. That means every potential claimant needs an with current bank information on file. And creating an account or updating it can be a lengthy process, especially inside a large organization.

If a business was not the importer of record but had tariffs contractually passed through to it — for example, by explicit tariff clauses, amended purchase orders, or separate line items on invoices — they may still have a commercial basis to recover their share from the importer. In practice, that means corporate tax teams should sit down with both the organization’s procurement experts and its largest suppliers to identify tariff‑sharing arrangements and understand what actions those importers are planning to take.

Why liquidation suddenly matters to tax leaders

As said, the Atmus ruling is limited to entries that are not final, which hinges on the . CBP typically has one year to review an entry and liquidate it (often around 314 days for formal entries) with some informal entries liquidating much sooner.

Once an entry liquidates, the 180‑day protest clock starts. Within that window, the importer of record can challenge CBP’s decision, and those protested entries may remain in play for IEEPA refunds. There is also a 90‑day window in which CBP can reliquidate on its own initiative, raising questions about whether final should be read as 90 days or 180 days — clearly, an issue that will matter a lot if your company is near those deadlines.

Data, controversy risk & financial reporting

The role of in-house tax departments in the process of getting refunds requires, for starters, giving departments access to entry‑level data showing which imports bore IEEPA tariffs between February 1, 2025, and February 28, 2026. If a business does not already have robust trade reporting, the first step is to confirm whether the business has made payments to CBP; and, if so, to work with the company’s supply chain or trade compliance teams to access ACE and run detailed entry reports for that period.

Summary entries and heavily aggregated data will be a challenge because CBP has indicated that refund claims will require a declaration in the ACE system that lists specific entries and associated IEEPA duties. Expect controversy pressure: As claims scale up, CBP resources and the courts could see backlogs. If that becomes the case, tax teams should be prepared for protests, documentation requests, and potential litigation over entitlement and timing.

On the financial reporting side, whether and when to recognize a refund depends on the strength of the legal claim and the status of the proceedings. If tariffs were listed as expenses as they were incurred, successful refunds may give rise to income recognition. In cases in which tariffs were capitalized into fixed assets, however, the accounting analysis becomes more nuanced and may implicate asset basis, depreciation, and potentially transfer pricing positions.

Coordination between an organization’s financial reporting, tax accounting, and transfer pricing specialists is critical in order that customs values, income tax treatment, and any refund‑related credits remain consistent.

Action items for corporate tax departments

Corporate tax teams do not need to become customs experts overnight, but they do need to lead a coordinated response. Practically, that means they should:

• • • confirm whether their company was an importer of record and, if so, ensure ACE access and banking information are in place now, not after CBP turns the refund system on.
    • map which entries included IEEPA tariffs, identify which are non‑liquidated or still within the 180‑day protest window, and file protests where appropriate to protect the company’s rights.
    • inventory all tariff‑sharing arrangements with suppliers, assess contractual entitlement to pass‑through refunds, and align with procurement and legal teams on a consistent recovery approach.
    • work with accounting to determine the financial statement treatment of potential refunds, including whether and when to recognize contingent assets or income and any knock‑on effects for transfer pricing and valuation.

If tax departments wait for complete certainty from the courts before acting, many entries may go final and fall out of scope. The opportunity for tariff refunds will favor companies that are data‑ready, cross‑functionally aligned, and willing to move under time pressure.

You can find out more about the changing tariff situation here

Key takeaways:

• • • The US achieved conventional military dominance, but it hasn’t solved the core problem — The navy that was destroyed was never the one controlling the Strait of Hormuz. The asymmetric force that is, the IRGCN, retained 80% of its small-boat fleet and may be able to replenish losses from civilian infrastructure faster than the US can eliminate them.

    • All three pathways to a quick resolution are blocked — The regime has hardened rather than collapsed, the diplomatic positions are nowhere near overlapping, and the US military posture is escalating, including possible ground operations, while allied support remains symbolic.

    • The conflict is likely measured in quarters, not weeks, and the economic difference is not linear — Businesses should be stress-testing against sustained disruption rather than planning for a return to normal, because the conditions required for a rapid resolution would each need to break favorably — and right now, none of them are.

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This is the first of a two-part series on the impact of the war with Iran as the conflict continues. In this part, we look at different ways the war could wind down quickly, and why none of them offer an immediate pathway.

The war with Iran is not going to be over by the end of this week.

That sentence shouldn’t be controversial four weeks into the ongoing war with Iran being waged by the United States and Israel, but it runs against the grain of how markets, policymakers, and many business leaders have been processing this conflict. The dominant assumption, visible in equity markets that have wobbled but not cratered, is that this is an acute shock with a definable end date.

However, very little about the military, political, or strategic picture supports that assumption.

While I make no claim to predict the war’s exact duration, I can lay out why the most likely scenarios point to a conflict measured in quarters, not weeks — and why that difference matters. In the next part of this series, we’ll sketch the economic consequences on a quarter-by-quarter basis, drawing on the latest projections from top economic thinkers. First, however, here is why this war probably drags on.

The wins aren’t winning…

By a surface level scorecard, Operation Epic Fury has been exactly the kind of lopsided success one would expect of a global superpower that’s going up against a regional player. Iran’s Supreme Leader was killed in the opening strikes, Iran’s conventional navy was sunk at anchor before they could sortie, and full air supremacy by the US appears established. If you were grading this on the metrics that won wars in the 20th century, you’d be forgiven for thinking it was nearly over.

Yet it is not nearly over. The Strait of Hormuz remains effectively closed. Daily transits have collapsed from 138 ships to fewer than five. Approximately 2,000 vessels and 20,000 seafarers are stranded in the region with nowhere to go. Brent crude is at $108 per barrel as of March 26, up roughly 50% since the war began. The International Energy Agency has called the current situation the largest disruption to global energy supplies in history.

The disconnect between the military scorecard and the strategic reality comes down to a single, underappreciated fact that the US destroyed the wrong navy. To be fair, it’s not like they had much of a choice. Iran’s conventional fleet had to go, and it went; however, that was playing on easy mode. Iran’s conventional fleet, its frigates, corvettes, and submarines, was a prestige force built for Indian Ocean power projection.

You can find out more about the here

The force actually designed to fight America, however, is the Islamic Revolutionary Guard Corps Navy (IRGCN), and it is something else entirely: a dispersed network of hundreds of armed speedboats, coastal missile batteries, thousands of sea mines, drone systems, and midget submarines spread across dozens of small bases along hundreds of miles of Persian Gulf coastline. The IRGCN’s entire doctrine, training, and equipment procurement were optimized for exactly one scenario, that of denying the Strait of Hormuz to a technologically superior adversary. That is the war Iran is now fighting.

Even though the IRGCN lost its most advanced platforms, those were not the workhorses of their fleet. The IRGCN retains an estimated 80% of its small-boat fleet, the fast boats that hide among fishing dhows, the crews that can scatter onshore and remount on surviving craft. The US is tasked with the mission of hunting small boats hiding among civilian vessels, in a fight in which Iran is willing to lose dozens of them a day to keep the Strait closed. This is not a mopping-up operation; rather, it is a war of attrition that the US is not structured to win quickly, and one in which Iran can replace its losses in ways a conventional navy cannot. For the US, it’s like trying to empty a bathtub while the spigot is still running.

Further, the math of the Strait itself is unforgiving. Iran had an estimated 5,000 sea mines before the war and has begun laying them. The US Navy decommissioned its last Gulf-based minesweepers in 2025 — timing that, in hindsight, looks catastrophic.

Indeed, the US can sink every major Iranian warship afloat and still not reopen the waterway. That, in fact, is roughly what has happened.

…And the off-ramps are blocked

If conventional military victory hasn’t solved the problem, there are three other ways this war ends quickly. As of late March, however, all three are jammed.

1. The regime isn’t collapsing

A US intelligence assessment completed before the war concluded that military action was unlikely to produce regime change even if Iran’s leadership was killed. That assessment has proven accurate. Iran’s constitutional succession mechanism activated as designed, and a new Supreme Leader, the previous one’s more hardline son, was installed within days. Also, protests are not sweeping the streets. Ideological regimes under external threat tend to harden, not fracture. Indeed, both the Taliban and Hamas have survived worse. The Iranian Islamic Republic, whatever else you want to say about it, appears to be surviving this conflict as well.

2. Diplomacy has nowhere to go

Iran rejected the 15-point plan offered by the US and published five counterdemands, including recognition of Iranian sovereignty over the Strait of Hormuz, which is a nonstarter for the US. Iran’s foreign minister says Tehran has no intention of negotiating, even as President Donald J. Trump insists talks are continuing. These positions aren’t close to overlapping, and both sides are staking their credibility on not budging first.

And Iran has good reason to believe time is on its side. The war is deeply unpopular in the US and the same affordability anxiety that swept Republicans into power is now threatening to sweep them out in the midterms. Tehran knows for every day the war goes on, they get to roll the dice that Trump will back out, giving them a strong incentive to get as many rolls as they can.

3. The military posture is escalating, not resolving

Ground troops, including paratroopers from the 82nd Airborne, are en route to the Gulf or have received deployment orders. Reports indicate the White House is weighing a seizure of Kharg Island, Iran’s primary oil terminal, an operation that would put American boots on Iranian soil for the first time. Seven allied nations signed a statement supporting Strait security, but it’s a paperwork alliance, lacking the kind of committed hardware needed to force a solution to the Strait’s closure.

What does this mean for business?

The Iranian regime isn’t folding, diplomacy doesn’t seem to be catching on, and the US military posture is expanding. None of the conditions point to a rapid resolution, and in fact, several of them point to a prolonged conflict.

If this war is measured in quarters rather than weeks, the economic consequences stop being a temporary, albeit painful price spike and start being a structural disruptive event, one that reshapes supply chains, reprices risk, and forces companies to make hard choices about where and how they operate. The difference between a three-week war and a three-quarter war is not a difference of magnitude, it is a difference in kind.

In the concluding part of this series, we’ll walk through what a quarter-by-quarter economic scenario would look like if the war continues.

Key insights:

• • • Different tools, different impacts— Tariffs raise costs but allow business to continue; sanctions create legal barriers that can make transactions impossible, with severe penalties for violations.

    • Scale brings scrutiny— Expansive US sanctions risk diminishing returns as targets develop workarounds and alternative financial systems.

    • Strategic or reactive use?— The core challenge isn’t whether sanctions work, but whether they’re deployed as part of coherent strategy or simply as visible action that avoids harder diplomatic or military choices.

In the foreign policy arsenal of the United States, economic sanctions have become a widely used weapon. As their use expands, so does the debate about how effective they actually are, what additional risks they create, and what unintended consequences they may bring.

Tariffs vs. sanctions: What’s the difference?

In wartime or during high-tension economic crises, both tariffs and sanctions can significantly impact businesses, but the two methods work in different ways.

Tariffs are a form of economic pressure. Governments use them to reduce an adversary’s export revenue, raise the cost of critical imports, signal disapproval of countries that continue doing business with the target, and generate funds for their own efforts. For companies, tariffs usually create friction rather than a full stop. Businesses can often continue importing, but at a higher landed cost. And that can compress margins and force decisions around topics such as renegotiating pricing, passing costs to customers, or shifting to lower-tariff suppliers.

Sanctions are closer to an economic blockade. They aim to isolate the target by banning broad categories of trade, restricting strategic sectors, blacklisting specific entities and individuals, and sometimes pressuring third parties through secondary sanctions. The business impact is often binary. For example, if a counterparty or its majority owner is sanctioned, trading partners generally cannot make the deal work by paying more. The transaction becomes illegal, and violations can trigger severe penalties.

How the difference shows up in operations

Consider a European manufacturing company in March 2022 that is trying to manage the crisis situation caused by Russia’s invasion of Ukraine.

If policymakers respond to the crisis with tariffs, such as a steep duty on Russian aluminum and timber, the primary challenge for this manufacturer is financial and operational planning. Costs rise, and then the company must decide whether to absorb the increase, reprice contracts, or switch suppliers, even if alternatives are more expensive.

Check out for more on the Supreme Court’s tariff decision here

If policymakers respond with sanctions, however, the situation can escalate quickly. Restrictions on major banks and key import categories, combined with aggressive designations of targeted companies and individuals can disrupt the entire supply chain. Payments can freeze, and goods can be delayed or seized. Even indirect connections to the sanctioned party can create problems, including for banks, shippers, insurers, and in some cases for logistics providers or warehouse owners. Indeed, what looked like a routine transaction can become non-compliant without warning.

The scale of sanctions use

Over the past several decades, the US has increasingly relied on economic sanctions as a core foreign-policy tool. In fact, by the early 2020s, US sanctions programs were targeting more than 30 countries and thousands of individuals and entities, with the sanctions primarily being administered by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). That trend has not only continued but accelerated under the current administration, which has turned to sanctions more frequently amid a volatile political environment. As the use of sanctions has expanded on a massive scale, their breadth and effectiveness have come under growing scrutiny.

Indeed, the phrase economic warfare reflects how modern sanctions often operate.

Many sanctions now target entire sectors, not only military goods. Secondary sanctions can threaten foreign companies that do business with sanctioned parties, effectively using access to the US financial system and the dollar as leverage. Critics argue that sanctions can also cause harm to civilians through inflation, shortages of essential goods including medicine, and broader economic damage. While targeted sanctions are intended to focus on elites, broader measures can affect entire populations.

What makes sanctions risky

The overuse of sanctions can create several problems. Yet sanctions can be politically attractive because they offer visible action without direct military risk, which may increase the temptation to use them even when they are unlikely to work.

As sanctions become routine, however, their impact may weaken as countries and companies develop workarounds, find alternative payment channels, and establish sanctions-resistant trade networks. Broad pressure from US sanctions can also encourage efforts to reduce reliance on the dollar-based financial system. China, Russia, and others have invested in alternative payment mechanisms such as cross-border interbank payment systems (CIPS) and systems for transfer of financial messages (SPFS) and expanded the use of non-dollar currencies. Over time, this response can reduce US financial leverage.

Sanctions can also provoke retaliation, including cyber activity, support for US adversaries, or wider regional instability. Sanctions also may harden diplomatic positions and make negotiation more difficult. In some cases, shared sanctions pressure can push sanctioned states closer together, strengthening the very coalitions that the US is trying to disrupt.

The argument for a middle ground

Supporters of sanctions argue that they provide an option between doing nothing and using military force. They can impose real costs on harmful actors, signal resolve, and respond to domestic demands for action, while still preserving diplomatic channels and avoiding full-on armed conflict.

The central question, however, is whether sanctions are being used as a substitute for strategy rather than as a single tool within a broader strategy. As sanctions continue to expand, it is worth weighing their benefits against their limits and long-term consequences. For policymakers and businesses alike, understanding these dynamics is critical to making informed decisions and managing risk.

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Key takeaways:

• • • The Strait of Hormuz crisis threatens a global recession — The effective closure of the Strait, which is being driven more by insurance withdrawal and risk perception than a physical blockade, has effectively halted roughly 20% of global petroleum flow. If this disruptions persist beyond 30 days, economic modeling points to overwhelming recession risk for major importing economies, with oil potentially reaching $100 to $200 per barrel depending on severity.

    • The world is facing an unprecedented dual-chokepoint shipping crisis — With the Strait of Hormuz effectively shut and the Houthis resuming attacks on the Suez/Bab el-Mandeb corridor, roughly one-third of global seaborne crude trade is compromised simultaneously. All five major container lines have suspended Hormuz transits, and the cascading delays will hit supply chains far beyond the Middle East, including those companies with no direct Gulf exposure.

    • Companies that act now will fare far better than those that wait — Supply chain disruptions propagate on a lag of two to four weeks, meaning that the pain from today’s anchored tankers hasn’t arrived yet. Businesses should immediately audit their Gulf supply chain exposure, secure alternative freight capacity before it disappears, and prepare for a significant escalation in cyber threats from Iran and its allies.

Just days into the largest military operation undertaken by the United States since the 2003 Iraq invasion, the potential closure of the Strait of Hormuz has triggered the most severe energy supply disruption since Russia’s invasion of Ukraine. The conflict with Iran has removed roughly 20 million barrels per day of crude from global markets and sent oil prices to above $80 as of press time. The conflict’s trajectory over the coming weeks will determine whether the world faces a manageable price shock or a full-blown recession.

How we got here

The February 28 strikes order by President Donald J. Trump followed weeks of negotiations around Iran’s nuclear program that ended without a deal just two days before the strikes began. Administration officials have since acknowledged that the timing was driven in part by Israel’s plans to strike Iran independently.

Iran’s Supreme Leader Ayatollah Ali Khamenei, age 86, along with his defense minister Brigadier General Aziz Nasirzadeh, the commander of the Islamic Revolutionary Guard Corps (IRGC), and approximately 5 to 10 senior Iranian officials, died in the opening salvo of the operation.

Even after the destruction of a large segment of Iran’s senior leadership, the war continues on. Hezbollah launched a rocket strike on March 3 with Israel initiating a ground invasion of Lebanon in response. Iran’s retaliation has extended across the region as drone and missile strikes have hit targets across Qatar, the United Arab Emirates (UAE), Kuwait, and Bahrain, while the US Embassy compounds in both Kuwait and Riyadh have been struck directly. Six American service members have been killed thus far.

Indeed, the regional escalation has given Iran the context to play one of the most feared cards in its arsenal — and one with the potential to throw an already fragile global economy into recession.

On March 2, Iran closed the Strait of Hormuz, vowing to attack any ship trying to pass through the strait. An European Union official said that began receiving VHF radio transmissions from the IRGC stating that no ships would be permitted to pass.

Ship-tracking data based on the MarineTraffic platform showed at least 150 tankers — crude oil and LNG vessels (those specifically built to transport liquefied natural gas — anchored in open Gulf waters. At least five tankers have been struck near the Strait, including one off Oman that was set ablaze, while the US-flagged tanker Stena Imperative was hit by two projectiles near Bahrain. On March 2, Marine insurers Gard, Skuld, and NorthStandard stated publicly they would effective March 5. One day later, four more of the 12 global insurance groups joined them, with London P&I Club, American Club, Steamship Mutual, and Swedish Club announcing similar moves.

Energy markets absorb the most severe supply shock in years

In light of 20 million barrels per day of crude being frozen out of the global markets, brent crude surged as much as 13% before settling at $83 per barrel, while WTI crude jumped to $76 at press time — both at their highest levels since the June 2025 conflict. Further, that several major oil companies and trading houses suspended shipments through the Strait as soon as strikes began.

“Unless de-escalation signals emerge swiftly, we expect a significant upward repricing of oil,” said , head of the company’s geopolitical analysis, citing the immediate impact of halting of traffic through Hormuz. UBS analysts warned clients that a material disruption scenario could send brent crude above $120 per barrel, while Barclays projected $100 per barrel as increasingly plausible. Just twenty-four hours later, that range has widened considerably. Goldman Sachs now models $120 to $150 per barrel in a prolonged war, JPMorgan sees $120 if the war lasts beyond three weeks, and Deutsche Bank’s worst-case approaches $200 if Iran mines the Strait.

OPEC+ announced a modest 206,000 barrel per day output increase for April, but as LeĂłn told Reuters, markets are now more concerned with whether barrels can physically move than with spare capacity on paper. If Gulf export routes remain constrained, additional production provides limited immediate relief.

Global shipping faces an unprecedented dual-chokepoint crisis

While the energy supply shock is severe, it is only one dimension of a broader shipping disruption that has no modern precedent. For the first time in history, two of the world’s most critical maritime chokepoints are simultaneously compromised — the Strait of Hormuz and the Suez Canal/Bab el-Mandeb corridor, the latter under renewed threat after the Houthis announced they would resume attacks. Together, these two passages that connect Asia to Europe handle roughly one-third of the global seaborne crude oil trade and a significant share of containerized cargo. All five major container lines — Maersk, MSC, CMA CGM, Hapag-Lloyd, and COSCO — have suspended or halted transits through Hormuz and are rerouting via the Cape of Good Hope, adding weeks to voyage times.

The practical consequences for businesses extend well beyond higher shipping costs. The rerouting absorbs vessel capacity that was already stretched thin, meaning delays will cascade across trade lanes that have no direct connection to the Middle East. Companies that source components from Asia, ship finished goods to Europe, or depend on just-in-time inventory models should expect weeks — not days — of compounding delays.

Dubai, Doha, and Abu Dhabi — three of the world’s busiest air cargo hubs — are also facing disruptions, meaning the usual fallback of shifting urgent shipments to air freight is itself constrained. For affected companies, the window to secure alternative routing and lock in freight capacity is closing fast; those companies that wait for the March 5 insurance deadline to pass before acting will find themselves competing for scarce logistics options in a market where scarcity is already the defining feature.

3 scenarios and their divergent economic consequences

There are three most likely scenarios as this conflict unfolds, each with their own challenges and potential outcomes:

Scenario 1: Rapid regime collapse and quick normalization

Credible but unlikely in the near term, this scenario banks on the fact that Iran’s opposition is real — the protest movement of the last year or so has been the largest since 1979, and the regime’s legitimacy has been severely eroded by economic collapse and violent crackdowns. If internal collapse occurs, energy markets would normalize rapidly.

Brent crude would likely retreat to the $70 to $75 range within weeks as the primary disruption drivers — fear and insurance withdrawal, not physical blockade — dissipates. Tanker traffic would resume once insurers restore war-risk coverage.

Scenario 2: Prolonged conflict, Strait mostly reopened

This is the most likely outcome based on available analysis. Energy Aspects founder Amrita Sen said she expects oil prices to , noting it is unlikely Iran could maintain a complete closure. She assessed that the US and Israel possess the military capability to neutralize Iran’s ability to fully shut down the Strait but acknowledged that sporadic attacks on individual vessels are far harder to prevent.

This is the critical distinction: A full blockade is unsustainable against US naval superiority, but one-off tanker strikes create an insurance and risk environment that chills commercial traffic almost as effectively. In this scenario, oil prices remain very high before gradually declining as the U.S. Navy establishes escort operations and mine clearance, with an open question revolving around insurance companies’ willingness to insure floating barrels of flammable liquid sailing into an open warzone, even under escort. Asian refiners face weeks of constrained supply access.

Scenario 3: Sustained Strait closure for weeks or months

This is the catastrophic tail risk. Roughly 20% of global petroleum consumption and significant LNG volumes moves through the Strait daily, representing an estimated $500 billion in annual energy trade. Saudi Arabia’s East-West Pipeline and the UAE’s Fujairah pipeline offer bypass capacity, but these routes can absorb only a fraction of the 15 million barrels per day now stranded.

Capital Economics estimated that a sustained $100 crude price could add to global inflation. And UBS warned that if disruptions extend beyond three weeks, Gulf producers could exhaust storage capacity and be forced to shut in output, pushing brent crude into the $100 to $120 range if not substantially higher if a significant blockade is held for a long duration.

The economic modeling is unambiguous, however, showing that disruption beyond 30 days carries overwhelming recession risk for major importing economies.

What companies should be doing right now

Of course, the economic impact of this conflict will not arrive all at once. Supply chain disruptions propagate on a lag — the tankers anchored outside Hormuz today represent goods and energy that won’t arrive at their destinations in two to four weeks. Companies that wait until these shortages materialize before they develop contingency plans will find themselves competing for scarce alternatives alongside everyone else. The window to act is now, not when the pain becomes visible.

Audit your supply chain exposure immediately

Any inputs, components, or raw materials that originate from or move through the Persian Gulf are at risk — and that extends well beyond oil. For example, one-third of global fertilizer trade passes through the Strait of Hormuz, meaning agricultural and chemical supply chains face disruption as well.

Business leaders should identify their companies’ Tier 1 and Tier 2 suppliers that have Gulf exposure, assess existing inventory buffers, and begin conversations with alternative suppliers before demand for those alternatives spikes. And companies with operations dependent on Middle Eastern air hubs — such as Dubai, Doha, Abu Dhabi — should assume they’ll face weeks of disruption to business travel and cargo routing and therefore plan accordingly.

Prepare for a serious escalation in cyber threats

Iran and its allies — including Russia, which has condemned the strikes and has well-documented cyberwarfare capabilities — have historically used cyber operations as an asymmetric response to kinetic military action. Indeed, there are signs already emerging that such actions are already taking place.

US critical infrastructure, financial services, and professional services firms are all plausible targets. The steps to prevent this are straightforward but urgent: Companies need to ensure that multi-factor authentication is enforced across all systems, verify that endpoint detection and backup protocols are current, brief employees on heightened phishing and social engineering risks, and confirm that incident response plans are not just documented but actually ready to be exercised.

The cost of preparation is negligible; the cost of a ransomware attack or data breach during a period of global economic stress is not.

Peering through the fog of war

As the conflict’s economic aftershocks move from risk to reality, the companies that act decisively now by diversifying supply chains, securing logistics, and hardening defenses will not just weather the disruption, but emerge more resilient whatever the outcome.

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Key insights:

• • • The Supreme Court decisively limited presidential tariff power under IEEPA—The decision held that the statute’s authority to “regulate importation” does not include the power to impose tariffs, especially absent clear congressional authorization for actions of major economic significance.

    • The ruling creates major uncertainty around refunds of already‑paid IEEPA tariffs— There is more than $175 billion potentially at stake and no clear, orderly mechanism yet for determining who is entitled to refunds or how they will be administered.

    • Tariffs are not ending but shifting to slower, more constrained legal authorities — As the administration pivots to statutes like Sections 232 and 301 that impose procedural hurdles and limits, it is likely to result in continued trade volatility rather than relief for businesses.

In a 6–3 ruling handed down February 20 in Learning Resources, Inc. v. Trump, the U.S. Supreme Court held that the International Emergency Economic Powers Act (IEEPA) does not authorize President Donald Trump to impose tariffs. For businesses that have spent the past year navigating a dizzying storm of rate changes, exemptions, and modifications — sometimes shifting within days of each other — the ruling offers a measure of vindication.

However, don’t exhale just yet. The decision is likely to produce more confusion and instability in the near term, not less. The IEEPA tariffs may be legally dead, but the trade policy fight is very much alive, the refund process is an open question, and the administration is already pivoting to Plan B. For businesses trying to plan around a coherent trade regime, the ground has shifted again — it just shifted in a different direction.

Shortly after the announcement of the Supreme Court’s ruling, President Trump announced that his is planning to invoke new trade authorities and potentially levy new, across-the-board tariff on US trading partners. As of press time, the White House declined further comment but had tentatively scheduled a news conference for later Friday afternoon.

Here’s what happened, what it means, and what comes next.

The Court’s ruling

Chief Justice John Roberts, writing for the majority, framed the case around a simple but consequential question: Can two words — regulate and importation, separated by 16 other words in IEEPA’s text — support President Trump’s claim to his ability to impose tariffs of unlimited amount, duration, and scope on imports from any country?

The answer, from the Court’s majority is No.

The Court’s reasoning proceeded along two tracks. First, three justices — Chief Justice Roberts, and Justices Neil Gorsuch and Amy Coney Barrett — invoked the major questions doctrine, the principle being that executive actions of vast economic and political significance require clear congressional authorization. They found none in the IEEPA. As Roberts wrote, the President must “point to clear congressional authorization” to justify his assertion of tariff power. “He cannot.”

If the past year has taught businesses anything about trade policy, it’s that certainty is now a luxury item.

Second, and commanding a full six-justice majority, the Court worked through IEEPA’s text and concluded that the word regulate simply does not encompass the power to tax. The U.S. Code is full of statutes authorizing agencies to regulate various things, but the government, in its arguments before the Court, could not identify a single one in which that power has been understood to include taxation. In one of the opinion’s sharpest lines, the majority expressed skepticism “that in IEEPA — and IEEPA alone — Congress hid a delegation of its birth-right power to tax within the quotidian power to ‘regulate.'”

What the ruling does not say

Here is where businesses may need to pay close attention: The Court said nothing about refunds of tariffs already paid.

Justice Brett Kavanaugh, writing in dissent, flagged the looming chaos directly. “The Court’s decision is likely to generate other serious practical consequences in the near term,” Justice Kavanaugh wrote. “Refunds of billions of dollars would have significant consequences for the U.S. Treasury… . [T]hat process is likely to be a ‘mess’… . Because IEEPA tariffs have helped facilitate trade deals worth trillions of dollars… the Court’s decision could generate uncertainty regarding various trade agreements.”

Check out for more on the Supreme Court’s tariff decision here

That mess is now a real, operational problem. There is more than $175 billion in IEEPA tariff collections at risk, according to a estimate released today. Nearly 1,000 companies had already filed preemptive refund claims with the Court of International Trade (CIT) before today’s ruling. Indeed, the CIT has indicated it has jurisdiction to order reliquidation and refunds, and the government has stipulated it won’t challenge that authority.

However, the mechanics — who gets paid back, how much, and when — remain deeply uncertain. Some importers passed tariff costs downstream to their customers or absorbed them into pricing adjustments that can’t easily be unwound. For many businesses, the refund question will be less a windfall than a logistical headache.

What the Administration might do next

Make no mistake, the White House took a significant blow today. The IEEPA was the administration’s most flexible and powerful tariff instrument and the tool that let the President impose duties instantaneously, on any trading partner, at any rate, with no procedural prerequisites. That tool is now gone.

However, as mentioned, the administration signaled immediately that it intends an end-around in order to keep as many tariffs in place as possible. the United States would invoke alternative legal authorities, including Section 232 of the Trade Expansion Act (national security tariffs), Section 301 of the Trade Act of 1974 (unfair trade practices), and other statutory provisions. None of these alternatives offer the speed and blunt-force flexibility that the IEEPA provided, however, and they may not replicate the full scope of the current tariff regime in a timely fashion.

Shortly after the announcement of the Supreme Court’s ruling, President Trump announced that his is planning to invoke new trade authorities and potentially levy new, across-the-board tariff on US trading partners.

Justice Kavanaugh’s dissent, notably, conceded the point while framing it sympathetically: “In essence, the Court today concludes that the President checked the wrong statutory box by relying on IEEPA rather than another statute to impose these tariffs.”

That framing understates the practical significance. The alternative statutes each come with procedural requirements — agency investigations, public hearings, durational limits, rate caps — that IEEPA’s emergency framework did not impose. Section 122, for instance, caps tariffs at 15% for 150 days. Section 232 requires an investigation and report from the U.S. a Commerce Department. Section 301 demands a formal determination by the U.S. Trade Representative. These are not insurmountable hurdles of course, but they are hurdles and they will take time.

What businesses should do now

If the past year has taught businesses anything about trade policy, it’s that certainty is now a luxury item. Today’s ruling doesn’t change that; rather, it just changes the axis of uncertainty. Here’s what any organization impacted by trade should be thinking about:

• • Review your tariff exposure immediately — Understand which of your import duties were collected under IEEPA authority compared to the other statutes (Sections 232, 301, 201). Only IEEPA tariffs are affected by today’s Court ruling. Section 232 tariffs on steel, aluminum, autos, and other goods remain fully in place, as do Section 301 tariffs on Chinese imports. For many importers, a significant portion of their tariff burden will not change. For others, it may change everything.
  • Engage trade counsel on refund claims — If you’ve paid IEEPA duties, the clock is ticking. The CIT has a two-year statute of limitations on refund claims, running from the date the tariffs were published. For the earliest IEEPA tariffs (the fentanyl-related duties on Canada, Mexico, and China from February 2025, for example), that window is already narrowing. If you haven’t filed a protective claim yet, consult with counsel now.
  • Prepare for replacement tariffs — The administration has made clear it intends to reimpose tariffs under alternative authorities. Thus, the effective tariff rate is not going to 0%. Even without IEEPA tariffs, estimates suggest the average rate would settle around 9%, still far above the roughly 2% that prevailed before the beginning of President Trump’s second term. Businesses should map out scenarios to plan for a period in which IEEPA tariffs are lifted but gradually replaced by duties under other statutes, potentially with different rates, different product coverage, and different country-specific treatment.
  • Monitor trade deal stability — Many of the bilateral and multilateral trade agreements negotiated over the past year — with the United Kingdome, the European Union, Japan, South Korea, and others — were structured around tariff levels built greatly upon the IEEPA. The legal basis for those arrangements is now uncertain. Watch for renegotiations, modifications, or lapses in these existing frameworks.
  • Build flexibility into supply chain planning — This is the hardest and most important advice. The trade policy environment is not returning to a stable equilibrium anytime soon. Today’s ruling is the end of one chapter, but the broader story — of a political system wrestling with how much tariff authority the President should have — is far from over. The administration will test the boundaries of its remaining statutory tools. And the courts will almost certainly be called upon again.

Taking in the bigger picture

For businesses, the practical takeaway from today’s Court order is more pedestrian but no less important: Strap in. The tariff landscape is shifting again, the refund process will be complicated, and the administration will find another way to pursue its trade objectives. Today brought clarity on the law, but clarity on the market is still a long way off.

For more on the impact of tariffs, you can download a full copy of the Thomson Reuters Institute’s recentĚýĚýhere

Key insights:

• • • ESG is becoming more operationalized — ESG is being conducted with a lower public profile while also playing an increasingly strategic role in supplier governance frameworks.

    • Data collection remains widespreadand robust — Companies continue to collect comprehensive ESG data from their suppliers.

    • Technology usage in ESG is increasing — Greater investment in automation demonstrates continuing commitment to effectively managing ESG.

Environmental, social and governance (ESG) issues have played an increasing role in global trade operations in recent years. As the United States government sharply pulled back its role in encouraging ESG in global trade in 2025, concerns were raised over whether that would impact ESG efforts globally.

However, ESG-related efforts in global trade have not diminished, although they are evolving in form and positioning, according to the Thomson Reuters Institute’s recent 2026 Global Trade Report. In fact, the report’s survey respondents said that ESG data collection from suppliers is now largely structurally embedded in trade operations, although at the same time, it is being carried out with a lower public profile than in previous years.

ESG management remains a core trade function

Managing ESG remains one of the most widespread responsibilities among trade professionals. Almost two-thirds (62%) of those surveyed said their role includes ensuring ESG compliance throughout the supply chain. That represents a higher percentage than for other responsibilities, such as procurement and sourcing, supplier management, trade systems management, risk management, customs clearance, and regulatory compliance. The only more widespread role being done by those global trade professionals surveyed is business strategy for global trade and supply chain.

More importantly, ESG remains integral and nearly universal when it comes to the supplier selection process. All respondents in the Asia-Pacific region (APAC), Latin American and the European Union-United Kingdom, as well as 99% of US respondents, report that ESG considerations remain moderately important, important, or very important in influencing their decisions around using a supplier. And overwhelming 78% say it is an important or very important consideration.

Clearly, as the report demonstrates, ESG remains a core component of the trade function for most businesses.

ESG moves toward structural governance frameworks

Only a very small proportion of respondents — 3% in the US and 4% globally — said they stopped ESG-related data collection entirely in 2025. Meanwhile, ESG data collection has increased across several major metrics.

As companies move to embed ESG expectations directly into their supplier governance frameworks, they are shifting these efforts from being a publicly declarative initiative to becoming operationalized as a permanent compliance and sourcing discipline alongside other operational considerations.

Businesses are focusing on supplier information in areas that have direct operational relevance. For example, companies collecting data on Free Trade Agreement (FTA) eligibility status for ESG purposes can also leverage the data to reduce costs, ensure supply chain security through Customs Trade Partnership Against Terrorism (CTPAT) participation, and better maintain compliance with country-of-origin requirements. Similarly, Country of Origin (COO) and Authorized Economic Operator (AEO) status are both classified under ESG but are also highly trade operations specific. These metrics merge the lines, representing areas in which ethical considerations intersect with practical trade strategy.

Supplier data collection is shifting to operational relevance as well. Indeed, the scope of supplier data being gathered remains broad and reflects a holistic view of the supply chain. The most common areas for ESG data collection in 2025 were: i) environmental metrics, such as water usage, waste management, energy management, and carbon emissions, including Scope 3 emissions; ii) social metrics, such as health and safety, labor standards, human rights including modern slavery or indentured service, and diversity in employees; and iii) governance and compliance, including data privacy, business ethics, and anti-corruption.

Data collection from suppliers

Meanwhile, ESG data collection has been scaled back in areas such as trade evaluation, AEO/CTPAT status in some jurisdictions, diversity in ownership, and anti-corruption assessments. The most cited reason for the pullbacks was insufficient cost-benefit return for collecting data in areas in which customer scrutiny was minimal. This trade-off reflects a rational reprioritization: companies are focusing their ESG diligence in areas in which regulatory risk is more material rather than reputational.

Integrating ESG into broader trade workflows

The report also shows that businesses are leveraging ESG to make it more operationally effective, drive greater efficiency, reduce costs, and add greater value for the organization. ESG is becoming less of a marketing and brand building exercise, and more of a compliance and sourcing discipline that factors into strategic decision-making — it is subject to the same analytical rigor as financial or operational risks.

To this end, organizations are less prone to make a string of bold public goals and commitments, or issue standalone ESG reports, updates, or scorecards that tout their progress. Instead, ESG data is being seamlessly embedded into supplier evaluation and selection alongside non-ESG business metrics and other considerations. As such, organizations are using ESG to quietly build the structural frameworks, data infrastructure, and management approaches they’ll need for more strategic planning.

ESG is shifting to strategically supporting business growth and away from reputational focus

Helping this shift along, the report shows, is that the use of technology to manage ESG has accelerated significantly in 2025. One-third of respondents said their organizations use automated ESG solutions, a major increase from only 20% in 2024. This provides a clear indication that more organizations are not only continuing but strengthening their commitment to effectively managing ESG.

And this provides a boost, because greater automation can improve the efficiency and ability of trade professionals to manage ESG efforts, further enhancing the integration of ESG data into other operational workflows as organizations incorporate ESG data to drive greater value.

What lies ahead for ESG

ESG practices and organizations’ embrace of them remain near-universal across trade operations. This continuation presents a clear indication that there is no widespread retreat from ESG management. For trade professionals, ESG is here to stay and is evolving into an operational discipline to help grow their business.

For organizations to have continued success in this evolving ESG environment, they should take several steps that require strategic thinking, including:

• • • Identify which metrics truly matter — Connect ESG metrics that affect trade operations, particularly those that impact supply chain cost, efficiency, and reliability.
    • Invest in the technology infrastructure — Improve efficiency in tracking and analyzing key ESG metrics.
    • Articulate ESG value — Develop the ability to demonstrate the value of ESG to the trade function and communicate it in business terms to senior management.

The shift of ESG towards operational trade management may represent a more sustainable long-term path forward than the earlier wave of ESG enthusiasm — embedding ethical considerations into core business processes rather than treating them as separate compliance exercises. By focusing on metrics that genuinely matter to business operations, companies are building practices that will persist regardless of any political winds or public relations trends.

Those corporate trade departments that can skillfully navigate this evolving environment will be positioned to more effectively leverage ESG considerations as a strategic asset and competitive differentiator. And in an increasingly complex and volatile global trading landscape, they will find themselves playing a more central role in their organizations’ success.

You can download a copy of the Thomson Reuters Institute’s 2026 Global Trade Report here

Key points:

• • • USMCA at risk — Rising tariffs, political friction, and the potential 2026 review are creating uncertainty around rules of origin, market access, labor obligations, and dispute‑resolution mechanisms — areas that are central to legal and tax planning.

    • Economic impact — Mexico depends on USMCA for exports, investment, and employment; and any disruption would be problematic.

    • Water as a strategic resource — The conflict over the 1944 Treaty and the new law reflect the critical importance of water usage and water rights in the bilateral agenda.

For almost 25 years before the United State-Mexico-Canada AgreementĚý(USMCA), it was the North American Free Trade Agreement (NAFTA) that defined the region’s economic relationship. Enacted in 1994, NAFTA removed most tariffs, encouraged foreign investment, and integrated supply chains across North America, especially in manufacturing, automotive production, and agriculture. This integration helped transform Mexico into a major export platform and contributed to North America’s emergence as a competitive economic bloc.

Over time, however, NAFTA drew criticism, particularly in the US, where concerns grew about trade imbalances, worsening labor conditions, and the agreement’s ability to address modern challenges such as . These political pressures set the stage for renegotiation and ultimately produced the USMCA, a more modern but also more politically sensitive framework.

The current chaotic environment around tariffs and trade suggests that these rules in North America may again be subject to revision. Understanding how tariffs, political dynamics, and resource‑related tensions interact is essential for organizations and corporations as they try to plan for the legal and tax implications that may arise as the 2026 review approaches.

A year of trade tensions

From the beginnings of Donald Trump’s second administration in January 2025, , marking the start of a more protectionist trade policy.

In March, some of those tariffs were exempted for products that comply with USMCA provisions. However, in December, President Trump declared that the US would allow the treaty to expire or seek to renegotiate it in 2026, alleging that Canada and Mexico have gained advantages to the detriment of US interests.

Not surprisingly, throughout 2025 and saw President Trump accuse Mexico of failing to comply with the 1944 Water Treaty, a historic agreement that regulates the distribution of water resources from the Bravo, Colorado, and Tijuana rivers. According to the US government, Mexico had not delivered the agreed-upon volumes, generating friction amid a political context already marked by trade disputes.

Mexico argued that prolonged droughts between 2020 and 2025 made compliance with the treaty difficult, affecting water availability in its own agricultural and urban regions. However, President Trump warned that if water flow to the US did not increase, he would impose a 5% tariff on Mexican exports, adding pressure to the bilateral relationship. Finally, after negotiations, an agreement was reached: Mexico must supply the remaining amount before 2030, which represents a significant challenge for the country’s water management.

In this context, the Mexican government promoted a structural reform to ensure compliance with the treaty and guarantee efficient resource management. On December 11, 2025, the and came into force the following day. This regulation establishes a new legal framework with three fundamental pillars:

• • • comprehensive state responsibility for water management;
    • exclusive powers for Conagua in the allocation, supervision, modification, and revocation of concessions; and
    • prohibition of concession transfers between private parties, preventing speculation and resource hoarding.

The law directly impacts strategic sectors such as agriculture, livestock, industry, and rural communities, as well as domestic services. Beyond its internal scope, this reform is interpreted as a mechanism to guarantee compliance with the Water Treaty, reduce the risk of trade sanctions, and strengthen Mexico’s position in future international negotiations.

Economic impacts and projections

For Mexico, the USMCA is not merely a trade agreement; it represents a strategic pillar for the country’s economic stability and sustained growth. Since its entry into the USMCA, Mexico has become a reliable partner in the North American region, guaranteeing its preferential access to two of the largest markets in the world. This advantage has driven foreign direct investment into the country, especially in sectors such as automotive, advanced manufacturing, agribusiness, and emerging technologies.

The importance of USMCA lies in the fact that . Without this legal framework, Mexico would face an adverse scenario because the imposition of significant tariffs would reduce the competitiveness of national products, increase supply chain costs, and directly affect job creation. The automotive sector, for example — and about 30% of manufacturing GDP in Q3 of 2025 alone and employs more than 1 million people — would be one of the hardest hit by the loss of these preferential conditions.

In addition, USMCA offers legal certainty for investors. Clear rules on intellectual property, digital trade, and dispute resolution reduce risks and encourage the arrival of foreign capital. Without this treaty, Mexico could experience an outflow of investments to other countries with more stable agreements, which would negatively impact job creation and projected economic growth.

The coming USMCA review

The possible renegotiation of USMCA, scheduled for later this year, generates uncertainty. This review process presents several possible paths for Mexico, each with distinct economic, political, and diplomatic implications. If the USMCA is successfully extended without substantial modifications, Mexico would preserve its preferential access to the US and Canadian markets, maintaining the commercial stability that supports most of its exports. This continuity would reinforce investor confidence, support job creation and stabilize diplomatic relations.

However, if no agreement is reached to extend the treaty, this absence of clarity would create uncertainty for businesses operating throughout North America. Investment decisions could be delayed, expansion plans postponed, and operating costs could rise due to increased scrutiny and customs enforcement. Further, diplomatic tensions could begin again, particularly if unilateral measures such as large tariffs are threatened again. In this environment, Mexico would need to adopt a cautious strategy focused on strengthening legal frameworks and offering targeted economic incentives to maintain its own competitiveness.

Another scenario in which the parties fail to reach consensus would activate the formal pathway toward the treaty’s expiration in 2030. While trade flows would continue in the short term, markets would begin adjusting to the anticipated end of the USMCA. This expectation could trigger a gradual relocation of investments and restructuring of supply chains, particularly in industries heavily integrated with US production networks, such as automotive manufacturing and advanced industrial sectors. Pressure on the peso, slower GDP growth, rising import costs, and early job losses would likely follow; and even if diplomatic efforts emerge to prevent severe disruption, the economic effects for Mexico would become progressively more adverse.

However, the most severe scenario involves one country withdrawing from the USMCA, which would cause the agreement to collapse for all three members. For example, if the US were to withdraw, Mexico would immediately face World Trade Organization tariffs, dramatically increasing export costs for manufactured goods and agricultural products and severely disrupting supply chains.

Clearly, any of these scenarios highlight how critical this year will be for Mexico. While a successful extension of the USMCA would support stability, attract investment, and sustain long‑term growth, a failure to reach agreements — or the withdrawal of a partner country — could reshape Mexico’s economic landscape for years to come.

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Key insights:

• • • Tech adoption is rising, but critical gaps remain — Adoption of technology has surged over the last year but several important trade functions are still not widely automated.

    • Satisfaction levels with technology remain low in some areasĚý— Trade leaders are generally satisfied with the gains they see from their use of technology, but lack of integration is hindering supply chain visibility efforts.

    • Organizations are increasing their technology investments — Technology budgets are expected to continue to grow this year.

The recently published 2026 Global Trade Report, from the Thomson Reuters Institute, discussed how the use of technology is rising across corporate trade departments, with trade professionals much more likely this year to report that their departments have deployed automated tools. In addition, many were even exploring the use of advanced technologies such as AI and blockchain.

In the report, the percentage of trade professionals that characterized their departments as being early adopters or behind the curve (meaning they’re still using manual systems) dropped significantly.

However, amid the rapidly growing adoption of technology, key challenges and gaps remain, the report showed.

Urgency to improve efficiency

Increasing efficiency in trade operations is a high priority, as workloads continue to increase. More than half (56%) of respondents said that workloads and overtime requirements have grown over the last year as a result of increased tariff activity and trade complexity. Respondents also cite more complex reporting and documentation requirements. And an even higher percentage said they expect those pressures to increase over the next year. As a result, nearly half (49%) of trade professionals surveyed report increased stress on their teams.

In addition, trade departments are taking on a more strategic role in their organizations, as detailed in the report, which noted that with the heightened trade and tariff volatility, trade professionals are more involved in executive decision-making and are expanding their scope of responsibilities, including having greater influence over procurement decisions. However, these added roles and responsibilities also mean that trade departments must take on additional workflows.

Fortunately, technology can be a critical force multiplier to help manage these changes. While about half of respondents said they expect increased budget allocations to hire additional staff over the next year, trade departments are increasingly looking to technology to help automate workflows and increase efficiency. In addition, automating routine tasks for compliance and reporting can free up staff time to focus on more complex tasks such as using advanced analytics and engaging in strategic planning.

It’s not surprising then, that while most respondents (52%) anticipate more budget for additional headcount this year, an even higher percentage (65%) said they expect more resources to be budgeted for technology solutions. This positions trade departments to reap the best of both worlds — more staff and greater use of technology to improve efficiency across the department.

Continuing technology gaps

Most trade departments, according to respondents, have now adopted trade and supply chain data analytics, automation for enterprise resource planning, supply chain management, and supply chain visibility. However, significant technology gaps remain, with relatively few respondents saying their departments have deployed tools and platforms to allow for global trade management (32%), managing tariff changes (7%), and managing classification changes (4%).

As a result, satisfaction with tech capabilities often remains modest at best. Fewer than one-in-five respondents report being very satisfied with the impact of technology on workflow efficiency for trade and supply chain management, keeping up with regulatory changes, or improving their ability to glean insights from trade data in order to drive business decisions.

One major contributing fact is that four-in-ten respondents said they are not yet satisfied with their organization’s level of technology integration. This lack of integration hinders the ability of the trading team to maximize their use of existing systems to track and analyze data across various functions and geographies. This is increasingly important as businesses seek to improve visibility across their entire supply chain.

Thus, it’s not surprising that system integration is the top technology investment priority for the next year. An overwhelming 83% of respondents said this is a high- or medium-priority to help support informed decision-making.

Only about a quarter of trade departments have visibility across regionsĚýĚý

— Thomson Reuters Institute, 2026 Global Trade Report

Modernizing trade technology

With 40% of organizations exploring emerging technologies such as AI and blockchain, and satisfaction levels remaining modest across currently deployed capabilities, a significant technology transformation opportunity exists. However, successful technology deployment requires strategic focus rather than adoption of the latest technologies simply for their own sake.

Trade leaders should focus their technology investments in several key areas:

Supply chain visibility platforms — Real-time tracking enables proactive rather than reactive management. Automated exception alerting, comprehensive visibility across multi-tier supply chains, and integration with other systems can create a solid foundation for data-driven decision-making.

Data analytics and predictive capabilities — The jump from 8% to 58% in the last year in respondents saying their organizations adopted and used trade and supply chain data analytics indicates widespread recognition of data’s strategic value. Organizations should invest in platforms that not only collect data but generate actionable insights through advanced analytics and machine learning. Predictive capabilities can anticipate disruptions before they occur, enabling preventive action rather than damage control.

AI-assisted product classification — Product classification is time-consuming, error-prone when done manually, and yet, critical for compliance. AI systems have the potential to dramatically improve both efficiency and accuracy while freeing trade professionals to focus on more strategic work rather than routine tasks.

More technology investments ahead

The recent surge in technology adoption is positioning corporate trade departments to increase efficiency and expand their capabilities. Despite numerous gaps depending on specific technology use, about half of trade leaders indicate they are already at least somewhat satisfied with the overall gains they are seeing because of their use of technology.

Despite the recent gains, however, significant gaps in technology adoption still remain. Fortunately, organizations are recognizing the importance and urgency of increasing their investments in technology, coupled with adding to trade department headcount.

While workloads and pressures continue to grow, the elevation of the trade department as a strategic partner to the business — along with growing involvement in decision-making at the executive level and increasing recognition of the trade function’s value to the business — suggests that organizations are likely to continue accelerating their investments in technology as an integral part of their growing commitment to supporting their in-house trade professionals.

You can download a full copy of the Thomson Reuters Institute’s 2026 Global Trade Report here