Geopolitical Risk Brief: April 2026

Our country risk experts provide insight into key geopolitical events that could impact the economic environment in April.

1. US naval blockade on Iranian ports
   
   Direct negotiations between the US and Iran held in Pakistan following the start of a two-week suspension of hostilities ended on April 12 with no agreement and the departure of both negotiating teams. A US blockade of the Strait of Hormuz was initiated on April 13. A two-week ceasefire remains nominally in place and indirect talks with Pakistani mediation will probably continue over the coming days.
   
   Unless talks resume, some level of renewed military operations is very likely. Major concessions from either side are highly unlikely, maintaining a very high likelihood of military action resuming. Iran’s leadership is also likely to continue conditioning any agreement, if not negotiations, on Israel ceasing its military operations against Hezbollah in Lebanon, which Israel is very unlikely to agree to for weeks.
   
   A naval blockade intending to interdict all vessels that have called at Iranian ports or coastal areas in international waters is likely to be very difficult and time-consuming for the US navy to enforce with the assets it currently has deployed in the region. US enforcement of its blockade would likely involve boarding or seizure of vessels once they have passed through the strait and have reached waters where the threat of Iranian military intervention is manageable, probably in the Arabian Sea or Indian Ocean. The US is very unlikely to intentionally damage such vessels.
   
   While demonstrative seizures in limited numbers are likely, the US does not have the capacity to seize and hold vessels breaching the blockade at scale. Actively enforcing such a blockade, and the resultant economic impact for Iran, would increase the likelihood of the Houthis increasing the scope of their attack activity beyond missile and uncrewed aerial vehicle attacks on Israel.


2. Growing protectionism around steel
   
   EU member states and the European Parliament provisionally agreed on April 13 to introduce major changes to the bloc’s steel import regime. Under the proposed new arrangement, the tariff-free quota of steel imports would be reduced by 47% to 18.3 million tons per year. Levies on excess steel imports above the quota level will increase from the current 25% rate to 50%. The proposal still needs to be approved by the Council of the EU and the European Parliament to enter into force, likely before June, when the current regime is scheduled to expire.
   
   While the proposal does not single out any specific countries, prior discussion of the measure suggested that it was largely designed to target mainland China, which the bloc views as the main source of subsidized overcapacity. The proposed regime does not currently include country limits or country-specific duties, but the EU reserves the right to set country-specific ceilings at a later stage. This will allow the EU to fine-tune the rules to meet the policy goal of incentivizing environmentally friendly production outside the bloc. Crucially, it also leaves space to negotiate specific terms or exemptions for the US.

What we are watching

The evolution of talks to end the Middle East conflict and the persistence of its economic effects. Talks were ongoing at the time of writing, but uncertainty over the conflict — and related disruptions — remain elevated. Even if an agreement is reached, and sticks, it will take time for conditions in the region to normalize, including for shipping routes, energy production and supply. The economic impacts, including rising input costs, lengthening delivery times and weaker activity, have further to go.