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This edition of Geostrategic Analysis examines how accelerating geopolitical rivalries and economic opportunities in the Arctic are reshaping strategies in the region. NATO’s arctic exercises, US–Finland icebreaker cooperation and China’s new Northern Sea Route container service highlight intensifying competition and new logistics possibilities.
We spotlight the infrastructure sector, in which cyberattacks, sabotage and disinformation continue to expand across Europe, testing infrastructure resilience.
Other issues include the fragile Gaza ceasefire, ongoing US-China structural challenges despite APEC de-escalation and the upcoming G20 Summit in South Africa, which could unlock new investment opportunities and test US-South Africa ties.
In the monthly Geostrategic Analysis, the EY-Parthenon Geostrategic Business Group (GBG) provides its insights on key geopolitical developments. Each issue includes our take on recent or upcoming political risks events and what they mean for global business. Subscribe Now
Topic 1
Arctic geopolitical rivalries are accelerating in tandem with economic opportunities.
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Read moreIn late September, NATO announced1 its first successful exercise on the remote island of Jan Mayen, signaling its goal of enhancing Arctic capabilities.
On 9 October, the US and Finland signed2 a $6.1 billion memorandum of understanding to co-develop 11 icebreakers to modernize Arctic operational capability.
On 13 October, China announced3 the completion of the first scheduled container service from East Asia to Northern Europe via the Northern Sea Route (NSR) — a coastal corridor along Russia’s Arctic shore. The NSR reduces transit time from China to Europe by nearly half compared to passage around the Cape of Good Hope. The 10th lowest4 annual Arctic sea ice minimum was hit in September, which facilitated the passage.
On 23 October, new details emerged5 about the Russian military’s underwater surveillance system in the Arctic, which uses technology that was indirectly acquired from the US and its allies.
If the NSR proves commercially viable, there will be more seasonal logistics services. China and Russia are likely to seize early mover advantage, as Western carriers remain cautious over environmental and safety risks. Over time, the NSR could become an alternative to chokepoints like the Suez and Panama canals.
Military competition in the Arctic will likely continue to intensify as access opens for longer periods and countries seek to protect their economic and security interests. For example, NATO is preparing6 a regional strategy which, along with national defense priorities, is driving investment in Arctic capabilities among the US, Canada and the Nordic countries, especially in patrol and surveillance equipment, seabed surveillance and underwater mine-clearing.
Governments will likely continue to accelerate investment in the Arctic economy. Increased demand for high-speed broadband connectivity to support energy exploration, defense operations, research and commercial activities is leading to growth in the polar satellite market, which could reach7 US$5.2 billion by 2033.
Major sectors affected include mobility; aerospace and defense; energy and resources; infrastructure; and insurance.
Arctic routes could soon enable logistics companies to offer a seasonal “fast lane” premium service for high-margin, time-sensitive goods, but shippers must consider security risks and environmental concerns. Executives should model NSR scenarios in supply chain planning, consider whether negotiating Arctic-compliant insurance would offset risk and develop Arctic shipping policies to mitigate reputational risk.
Demand for defense equipment and capabilities will rise as military competition intensifies. Defense contractors, aerospace and shipbuilding firms should consider innovating for extreme environments. Executives should also assess portfolio readiness for Arctic specifications, the potential applicability of commercial technologies to Arctic defense priorities and the potential for partnerships with governments and other NATO suppliers.
Arctic energy reserves present opportunities for exploration and energy diversification, but carry sanctions, environmental and insurance risks. Energy and mining executives should build geostrategic risk models for Arctic ventures, stress-testing investment upsides against sanctions and climate litigation and consider joint ventures with local operators to share risk.
The surge in demand for polar broadband and subsea cable protection will open a new frontier in telecom and infrastructure markets. Port upgrades, ice-class vessel demand, subsea cable protection and the need for resilient telecoms and other infrastructure will create opportunities for infrastructure, engineering, construction, telecom and technology firms. Executives should position for public-private partnerships (PPPs) in Arctic infrastructure, evaluate financing models for subsea cable security and integrate cybersecurity and climate resilience into Arctic strategies.
Organizations investing in the region could face reputational risks without proper partnership and coordination with Arctic governments and Indigenous communities, who are increasingly concerned about the threat of “green colonialism”8. Executives should ensure their companies’ Arctic projects include strong stakeholder management strategies.
Government investments in Arctic mining companies, public infrastructure and carbon capture, transportation and storage (CCS) solutions could spur private investor interest in companies with Arctic capabilities. Arctic projects will face high capital intensity and risk premiums. Financial institutions can enable investment by innovating on blended finance and risk-sharing structures. Insurance executives should consider developing Arctic-specific insurance products, leveraging multilateral guarantees and embedding geopolitical and climate risk analytics in underwriting.
For more information, contact Kate Delgado-Kizer.
Topic 2
EU to boost infrastructure resilience amid rising hybrid warfare, climate and technology risks.
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Read moreRecent hybrid incidents9 and major blackouts10 have renewed urgency to strengthen Europe’s critical infrastructure resilience amid aging assets, maintenance backlogs, climate-related stress and rising AI-driven power demand. Physical attacks on infrastructure have quadrupled since 202311 and cyberattacks continued to increase between 2024 and 202512.
In October 2025, the EU extended sanctions against Russian individuals and entities involved in hybrid activities abroad.13
Across Europe, governments are designating14 national “critical entities” in digital, energy, financial and transport infrastructure to eventually meet stricter physical and cyber resilience requirements.
Intensifying competition over advanced technology will drive cyber espionage and IP theft15, while European organizations’ growing unease over dependence on US digital infrastructure is driving the EU’s call for a “sovereign digital transition.”
EU and NATO will advance resilience through initiatives like the Baltic Sentry initiative16 and the new EU Cyber Solidarity Policy regulatory frameworks to strengthen cyber17 and physical preparedness of critical infrastructure and other strategic sectors. And the European Commission will propose a Data Centre Energy Efficiency Package18 in 2026 to improve energy efficiency in digital infrastructure, including data centers.
Hybrid confrontation is likely to persist - and intensify around energy infrastructure this winter. Within the EU, increasing levels of interconnectedness due to growing AI adoption and the green transition are broadening Europe’s exposure to such hybrid threats.
Hybrid attacks have already caused hundreds of millions of euros in losses across Europe’s energy, transport and digital sectors. Rising AI-driven power demand and climate-related stress are increasing operational risks and infrastructure strain, adding urgency for infrastructure companies to prove prevention of and preparedness for disruptions through stress-testing, supply-chain mapping and robust data-governance and talent-security measures. Executives should also expect insurance costs to rise.
New resilience and stockpiling rules will increase transparency demands and compliance costs, especially for energy and telecoms equipment and for infrastructure, making it essential to align with evolving procurement requirements and engage government stakeholders to demonstrate understanding of vulnerabilities and disruption readiness through scenario planning and crisis simulation exercises.
For more information, contact Famke Krumbmüller.
Topic 3
Gaza ceasefire stability, US–China tensions after APEC, and the G20 Summit in South Africa’s impact on investment.
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Read moreOn 13 October, a US-led plan19 to end the conflict in Gaza was signed in Egypt after significant involvement from Egyptian, Qatari and Turkish negotiators. Alongside this, high-profile visits to Israel by US President Donald Trump and other American leaders further underscored Washington’s enduring commitments to the region. Despite some violence, initial phases of the ceasefire have broadly held thus far. But complex issues around Gaza’s governance, border controls and reconstruction require further negotiation and may remain unresolved in the near to medium term.
Following two years of hostility, the ceasefire offers immediate security improvements for businesses in the region and in surrounding maritime areas, enhancing operational stability. Companies should nevertheless remain vigilant in monitoring geopolitical risks in the region. Executives should revisit scenario planning and economic modeling assumptions while maintaining robust crisis management plans. And they should monitor evolving reputation and compliance risks in the region. If the ceasefire holds, Gaza’s estimated $70 billion reconstruction20 would likely require significant involvement from aid organizations, the private sector and regional sovereign-wealth funds.
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Read morePresident Donald Trump met with Chinese President Xi Jinping21 on the sidelines of the annual Asia-Pacific Economic Cooperation (APEC) Leaders' Meeting in Busan, South Korea on 30 October. The bilateral meeting yielded modest, reciprocal de-escalations across multiple fronts, including the US’s fentanyl-related tariffs, some of China’s export control measures over rare earths products and port fees. China also restarted US agricultural purchases, notably soybeans. While the decision to engage in leader-to-leader dialogue indicates a mutual preference by Beijing and Washington to avoid sharp escalations in their economic dispute. Nevertheless, the lack of a substantive outcome on structural economic and geopolitical issues indicates that fundamental disagreements remain in the US–China relationship.
While many business leaders likely welcome the (potentially only temporary) reduction in US-China tensions, there remains a risk of escalation in global trade tensions in the coming months, with potential expansionary trade restrictions. In particular, uncertainties will continue in sectors exposed to the key sources of leverage that Washington and Beijing have — semiconductors and rare earth minerals, respectively. As a result, market volatility driven by tariff uncertainties, new market barriers and regulatory scrutiny is likely to persist. The use of export controls and other industrial policy tools is likely to continue — especially in strategic industries such as technology, advanced manufacturing and biotech. This underscores an accelerated need for multinational companies to adapt their operating models and their legal and compliance structures to the new geopolitical environment.
For more information, contact Adam Barbina
The G20 Leaders Summit will be held in South Africa on 22 to 23 November - the first time such a summit has been held in Africa. After US threats to boycott the summit, it is expected that Vice President JD Vance will attend — which could create an opportunity to help stabilize US-South Africa ties22. Under the summit theme “Solidarity, Equality, Sustainability,” South Africa hopes to advance African priorities23 in global financial reform, climate finance and infrastructure investment, as well as potentially exploring cooperation on critical minerals and regional security. Following the summit, the US will take over the G20 presidency, which will likely lead to a shift in G20 priorities during the following year.
Following the UK’s recent commitments24, the AI for Africa Initiative - which the G20 helped to launch — may provide additional opportunities for public and private sector investment. The G20 Summit could also shape future South Africa–US trade dynamics, with potential impacts across mining; manufacturing, particularly automotives; and agriculture. A bilateral trade roadmap may unlock tariff relief and critical mineral cooperation, benefiting both South African exporters and investors. Businesses should monitor the outcomes of the summit closely, especially regarding financial regulatory alignment and regional trade.
For more information, contact Angelika Goliger
Topic 4
Companies are localizing supply chains and operations in response to trade tensions and regulatory fragmentation, signaling a long-term strategic shift.
In the September 2025 edition of the EY-Parthenon CEO Outlook, nearly 75% of CEOs said they were either in the process of localizing or have localized some part of their production within the country of sale. Just over half were in the process or have reorganized supply chains to serve a particular regional bloc. According to this study, companies are embracing these localized or regional models in response to trade tensions, more fragmented regulatory environments and geopolitical instability. In particular, many CEOs seem to be beginning to view localization of their US operations as a strategic imperative, drawing lessons from the widely adopted “in China, for China” approach. Importantly, the majority of CEOs say these localization and regionalization measures are long-term strategic shifts.
Geopolitical risks and uncertainty — as part of the broader NAVI world in which companies must operate — is motivating executives to build more diversification, redundancy and resiliency into their global operations and supply chains. This shift toward localization and regionalization challenges traditional global business models, requiring executives to rethink operations, cost structures and risk management. Executives need to assess trade-offs between efficiency and resilience, align with local regulations and consider investing in new or expanded capabilities in some regions. Given the expected long-term nature of these business model changes, executives should incorporate strategic foresight into their decisions so that their company is positioned for growth.
Additional EY contributors to this article include Jay T Young, Alessandro Faini, Ben-Ari Boukai, David Li and Jessica Cunningham.
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AI policy fragmentation, financial regulation shifts, US tariffs, Russia–China ties, UNGA debates and more
Global trade shifts, EU energy strategies, Asia-Pacific dynamics, the G7 summit, and more
The EY-Parthenon Geostrategic Business Group (GBG) provides its take on key geopolitical developments and the impact of these political risks on international business. Each monthly EY-Parthenon Geostrategic Analysis issue includes assessments of recent or upcoming geopolitical risk events and what they mean for companies across sectors and geographies.
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