young asian couple climbing up the cliff

Geostrategic Analysis: May 2024 edition

The Geostrategic Business Group’s monthly analysis of key geopolitical developments and their business impacts.

Escalating tensions in the Middle East heighten the risk of further conflict, however, a variety of countries continue to seek diplomatic paths for regional stability. Meanwhile, growing demand for critical minerals supporting the energy transition is driving increased interest in deep-sea mining, amid geopolitical competition and environmental concerns.

This edition also explores the potential policy impacts from South Africa’s upcoming elections, ongoing tensions between Armenia and Azerbaijan, Vietnam’s leadership changes and G20 countries’ government debt levels.

Subscribe to stay informed and navigate the complexities of today’s geopolitical environment.

In the monthly Geostrategic Analysis, the Geostrategic Business Group (GBG) provides its insights on key geopolitical developments. Each issue includes our take on recent or upcoming political risk events and what they mean for global business. Subscribe Now

In this issue

  1. Top development: Middle East hostilities raise prospects of regional escalation
  2. Sector in focus: Mining and metals
  3. Other issues we are watching: South Africa's election, Armenia-Azerbaijan tensions, Vietnam’s leadership changes
  4. Geostrategic indicator of the month: G20 countries’ government debt
Hikers exploring snow capped mountain landscape

Topic 1

Top development

Middle East hostilities raise prospects of regional escalation

What happened

In April, military strikes escalated between Israel and Iran, including an air strike of more than 300 missiles and drones targeting Israel and a reported retaliatory strike in Iran that was widely attributed to Israel.


The G7 and the United Nations (UN) condemned Iran’s strike¹ and the United States (US), United Kingdom (UK) and others issued new economic sanctions² on Iranian entities. Meanwhile, hostilities in Gaza continue, as have Red Sea tensions discussed in the February edition of Geostrategic Analysis.

What’s next

Despite the stated desire of both Iran and Israel, as well as outside powers, to avoid a regional war, the potential for escalations and miscalculations between Iran and Israel is growing, especially if further direct strikes occur. Moreover, continuing hostilities in southern Lebanon and northern Israel further increase the risk of an even larger conflict. Still, all players currently telegraph that they wish to avoid a wider war and in the short term, the focus is expected to return to Israel’s military operation in Gaza and efforts to reach a ceasefire with Hamas.


External powers will likely reinforce support for traditional allies, and some may seek opportunities to defuse tensions. The Biden Administration is likely to continue to explore opportunities for historic regional compromises such as the formalization of a Palestinian state and expanding Israel’s normalization of diplomatic relations with countries in the region. Russia is likely to further align with Iran, potentially helping to bolster its military capabilities. China will likely seek to maintain its relationships across the region, especially in the Gulf, and could seek a more active mediation role.


In the long term, the specter of Iran’s nuclear capabilities will once more be a leading regional priority in global capitals. Given recent tensions, some are likely to intensify exploration of diplomatic and military actions to limit Iran’s progress in this sphere.

Business impact

Major sectors affected include energy, financial services, advanced manufacturing and mobility, aerospace and defense.

Regional hostilities involving a major global oil producer could lead to further rise or volatility in global energy prices in the long term. Investors should plan for energy pricing volatility and the potential cost of capital impacts from such changes.

The risk of disruption to commercial transportation in the Strait of Hormuz (and other maritime chokepoints) is likely to persist in the near and medium term, as discussed in the EY 2024 Geostrategic Outlook. Global oil and gas supply could contract if ship seizures accelerate. Corporates dependent on regionally sourced supply chains should consider operational challenges and potential supplier diversification strategies to grow enterprise resilience.

Aerospace and defense companies could see greater demand for advanced anti-missile and drone systems following their success in defending Israel. Similarly, governments will likely maintain increased defense spending in the context of current hostilities both in the Middle East and Ukraine.

Close up view of hand holding ice

Topic 2

Sector in focus: Mining and metals

Geopolitical competition in deep-sea mining creates risks and opportunities

What happened

The US announced the outer limits of its extended continental shelf for the first time in December 2023, expanding its economic maritime claims by about 987,700 square kilometers.³


There are renewed efforts by US senators and former government officials for the Senate to ratify the 1982 United Nations Convention on the Law of the Sea (UNCLOS).⁴ A separate bill introduced in the US House of Representatives encourages deep-sea mining on national security grounds.⁵


At the recent Council of the International Seabed Authority (ISA) session, delegations from Russia and China, which have ratified UNCLOS, objected to the new US maritime claims, noting the US is not a party to the treaty.⁶

What’s next

As the energy transition continues, demand for critical minerals — including cobalt, copper, lithium, nickel and rare earths — may continue to grow. Trade in critical minerals has already doubled in the five years to 2022 and is likely to continue to grow significantly as governments and companies seek to increase renewable energy production and reduce greenhouse gas emissions.⁷


The ISA Council will meet again in July to attempt to move forward on the draft exploitation regulations for mineral resources in the international seabed. Given geopolitical tensions and environmental concerns⁸ about such activities, some observers question whether the ISA will be able to finalize these regulations by its stated 2025 deadline.


More countries may move forward on their own, given scientific estimates that about 35–45% of the supply of critical metals will come from deep-ocean mines in the coming decades.⁹ Nauru¹⁰ has been an early mover in this arena, and Norway¹¹ recently became the first country to approve deep-sea mining within its waters.

Business impact

As demand for critical minerals continues to grow, deep-sea mining is likely to become an increasingly active market for private sector capital and government investment. Executives should monitor geopolitical competition and international legal developments to inform their strategies regarding in which countries’ economic zones they engage in exploration for or exploitation of minerals.

Environmental concerns about deep-sea mining and ecosystem rehabilitation challenges are likely to persist, so mining companies should develop strategies for oceanic assets in consultation with policymakers and environmental organizations. Doing so can help to manage reputational and license-to-operate risks. Further, banks concerned about the environmental impacts may limit or condition funding streams for miners. Companies that source critical minerals – including automakers – should ensure they have full transparency into their supply chains for these inputs.


For more information, contact Courtney Rickert McCaffrey and Angie Beifus

High angle view of foggy hill with meadow

Topic 3

Other issues we are watching

South Africa's election, Armenia-Azerbaijan military tensions, Vietnam leadership changes

South Africa's election will reshape the local political landscape

In the upcoming election on 29 May, the ruling African National Congress (ANC) is expected to lose its majority.¹² Opposition parties, varying from the leftist Economic Freedom Fighters to the right-leaning Democratic Alliance, could therefore gain influence in domestic policymaking and international affairs through coalition governments13, at both the national and local levels, potentially affecting areas such as economic policy and South Africa’s foreign relations.

The result of the upcoming elections could create uncertainty in sectors such as natural resources and energy, banking, and tourism, considering potential changes to the policy stance of government and to leadership roles at key government departments. Companies should also anticipate negative impacts to government services, particularly at a municipal level, such as road maintenance, and electricity and water supply disruptions. Further, if the ANC enters into coalition governments with populist parties, it could weaken investor sentiment, impacting capital flows and market stability.


For more information, contact Angelika Goliger

Armenia-Azerbaijan tensions to increase regional instability

On 5 April, the European Union (EU) pledged €270 million in grants to support Armenia’s economy as it pivots away from Russia, a historic ally.14 This comes after Russia was viewed as insufficiently supportive in Armenia’s confrontation with neighboring Azerbaijan, which is backed by Turkey. Azerbaijan and Armenia have reportedly started to demarcate the border, which may change the terms agreed in their 2020 peace agreement.15 In a sign of growing frustration with Armenia’s alignment with the West, Russia is withdrawing its peacekeeping troops from the disputed region. Despite the EU and the US continuing to encourage a diplomatic solution, there remains a risk of renewed conflict along the border.

The EU economic support package is focused on investments in energy infrastructure, including a new Black Sea electricity cable to supply clean energy to the EU. Meanwhile, Armenia has been enhancing its regulatory environment, including anti-corruption and rule-of-law reforms, to attract foreign investors. However, the looming threat of renewed conflict could undermine investor confidence in the region. Energy providers should thus evaluate market growth opportunities in the context of a heightened risk environment.

For more information, contact Barry Perkins

Vietnam leadership changes create policy and regulatory uncertainty

The resignation of Vietnam’s president in March – marking the second departure of the country’s head of state in less than two years – and of the legislative speaker in April, have created new political uncertainty in the country.16 These resignations are reportedly the result of ongoing anti-corruption efforts that seek to secure economic and social stability. Selection of a new president is complicated by a potential second anticipated leadership appointment to replace the Communist Party of Vietnam’s general secretary, whose term will expire in early 2026 but may end earlier due to speculation about his poor health. 

Ongoing leadership turnover creates political and policy uncertainty for companies as Vietnam continues to benefit from broader supply chain diversification trends. While Vietnam is expected to enhance its position as a critical global manufacturing destination, companies and investors should continue to adopt stronger political risk management capabilities and plan for regulatory uncertainty during what could be an extended period of political change. Stronger corporate governance requirements will also elevate reputation and compliance requirements for companies.

Cropped hand of a person holding a compass

Topic 4

Geostrategic indicator of the month

G20 countries’ government debt

The indicator

In recent decades, government debt has risen substantially across major economies. Higher interest rates have made the need for debt management more urgent. For example, the US and the UK are expected to reach unprecedented highs in government debt in the forthcoming year.17 With jurisdictions accounting for 60% of global GDP going to the polls this year, debt levels are likely to rise even further because many governments tend to increase expenditure ahead of elections, to stimulate economic momentum and constituent support.

Business impact

High or rising debt levels could prompt governments to seek additional sources of revenue, which raises the risk of tax increases for companies. Debt levels also raise the risk of sovereign default in some jurisdictions. Such a scenario would directly affect revenue and growth prospects. On the other hand, social spending cuts can be politically destabilizing, leading to a significant increase in support for populist parties as well as a rise in political fragmentation. Companies should therefore prepare for potential swings in capital costs and operational conditions in countries with debt issues.

Additional EY contributors to this article include Adam Barbina, Ben-Ari Boukai, Jay T. Young, Alessandro Faini and Hulisani Muloiwa.

Geostrategy by Design

A new book from the Geostrategic Business Group and a professor from the ESG Initiative at the Wharton School, advises executives on how to manage geopolitical risks in the new era of globalization. 

Geostrategy design

In this series

Geostrategic Analysis:
April 2024

Geopolitical competition over EV, US data security regulations, China’s innovation, India’s election and more

Geostrategic Analysis:
March 2024

Disagreement at the WTO, global interest rates, Indonesia’s election, a rise in armed conflicts, and more.  

Geostrategic Analysis:
February 2024

Red Sea instability, Taiwan’s outlook, Brazil’s and Argentina's reforms, and more.                                              

Contact us
Like what you've seen? Get in touch to learn more.


The Geostrategic Business Group (GBG) provides its take on key geopolitical developments and the impact of these political risks on international business. Each monthly Geostrategic Analysis issue includes assessments of recent or upcoming geopolitical risk events and what they mean for companies across sectors and geographies.

Related content

Top 10 geopolitical developments for 2024

An even more complex geopolitical environment is on the horizon. Learn how businesses need to innovate and adapt their strategies to stay ahead.

12 Dec 2023 Courtney Rickert McCaffrey + 2

Top 10 business risks and opportunities for mining and metals in 2024

In 2024, miners face more pressure to meet expectations around ESG, climate change and license to operate. Learn more.

11 Oct 2023 Paul Mitchell

How a government struggling with debt navigated towards a brighter future

EY professionals helped Puerto Rico exit bankruptcy and build a foundation for future growth. Learn more in this case study.

11 Aug 2022 Gaurav Malhotra + 2