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POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

4. UNCTAD warns of growing geopolitical risks to global economy and trade

The United Nations Conference on Trade and Development (UNCTAD), in its latest Trade and Development
Foresights 2026 report, warned that rising geopolitical tensions are increasingly replacing trade disputes
as the primary source of instability for the global economy. While the global economy entered 2026 on a
relatively stronger footing supported by resilient trade activity, industrial production in developing
economies, and AI-linked investments, the outlook has weakened due to disruptions in energy markets,
trade routes, and financial conditions.

UNCTAD projected global growth to slow from 2.9 % in 2025 to around 2.6 % in 2026 amid higher energy
prices, transport disruptions, and financial market volatility. Global merchandise trade growth is also
expected to moderate significantly during 2026 as geopolitical fragmentation, supply chain disruptions,
and rising uncertainty increasingly affect investment decisions and industrial activity.

The report noted that trade growth remains uneven and concentrated in AI- and technology-related
sectors, while traditional manufacturing and commodity-linked industries continue to face weaker
momentum. Developing economies remain particularly vulnerable due to elevated financing costs,
volatile capital flows, and exposure to commodity price shocks.

UNCTAD further highlighted that disruptions in major maritime trade and energy routes, including the
Strait of Hormuz, are increasing shipping costs and exposing vulnerabilities in global supply chains. Rising
non-tariff barriers, tighter regulations, and geopolitical fragmentation are also reshaping global trade
patterns and increasing uncertainty for businesses and investors.

5. Recent U.S.–China Trade Agreements Signal Partial Easing of Trade Tensions

Recent developments in U.S.–China trade relations indicate a limited easing of bilateral trade tensions
following high-level discussions between the two countries. Both sides agreed on a framework for
reciprocal tariff reductions on selected non-sensitive goods, along with sector-specific trade commitments
in agriculture, aviation, and critical minerals aimed at stabilizing trade relations amid broader geopolitical
and supply chain concerns.

China reportedly committed to increase imports of U.S. agricultural products, including purchases of at
least US$17 billion annually during 2026–2028 in addition to existing soybean commitments. The
agreement also includes the resumption of U.S. beef and poultry exports to China and discussions on
easing biotechnology-related trade restrictions.

In the aviation sector, China announced plans to purchase 200 Boeing aircraft, marking the first major
commercial aircraft agreement between the two countries in several years and supporting recovery in
U.S. aerospace exports. Both countries also resumed consultations on export controls, rare earth
minerals, and investment-related issues, highlighting the growing strategic importance of critical minerals
and advanced technology supply chains in global trade negotiations.

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