The limited return of electricity to the Iberian Peninsula has revealed a more profound weakness within the area’s power infrastructure.

Monday’s extensive and rapid power outage, which halted activity across much of Spain and Portugal, has generated considerable regional and international apprehension.

Red Electrica (REE), Spain’s national grid operator, and Portugal’s E-Redes are currently investigating the precise reasons behind the abnormal oscillations detected in their high-voltage lines. 

These oscillations also resulted in synchronisation failures within the interconnected power grid that extends into France.

Power generation mix key

Preliminary analysis by Rystad Energy indicates that the generation mix in each country was a key factor in both the power outage and the subsequent recovery, now that electricity has been restored to much of the region.

Rystad Energy’s senior analyst, Pratheeksha Ramdas, said in an emailed commentary:

A critical blackout lasting a few hours highlighted the heavy dependence on cross-border electricity flows.

“Spain’s high renewable penetration exposed difficulties in balancing intermittent supply, while Portugal’s complete reliance on imports underscored its lack of flexibility and energy storage.”

Just after noon on Monday, Spain’s power grid had a major hiccup, causing it to cut off entirely from the rest of Europe and plunging the country into darkness.

The Spanish mainland’s electricity transmission grid suffered a complete collapse within minutes due to intense fluctuations.

Everything went haywire when the system crashed. Metro lines in several cities went down, forcing evacuations.  Airports, traffic lights, and communication networks were also affected.

Approaching the time of the power disruption, Spain’s electrical grid was experiencing demand similar to its typical midday peak.

Electricity demand was approximately 27,500 MW. This demand was primarily met through a combination of solar photovoltaic and onshore wind power, natural gas, and a small amount of nuclear energy.

Meanwhile, Portugal maintained a steady energy demand of approximately 8,000 MW, primarily sourced from hydroelectric, wind, and some imported power from Spain. 

In contrast, France, benefiting from its stable nuclear-centric grid, consistently generated over 55,000 MW and continued to export excess electricity to neighboring countries.

“This regional interdependence is typically a strength — but it became a stress point in this instance,” Ramdas said.

Spain’s electricity imports

Spain typically imports a significant amount of electricity from France. However, in 2022, due to extensive nuclear maintenance in France, Spain became a net exporter of electricity for a temporary period.

Spain commonly redirects some of its imported electricity to Portugal. 

This practice assists in stabilising the grids of both nations, which rely significantly on renewable energy sources.

In 2024, Spain’s electricity imports from France totaled about 10.1 GWh.

Simultaneously, its electricity exports to Portugal increased to 14 gigawatt hours (GWh). 

During the power outage, French grid operator RTE’s automatic safety protocols disconnected the interconnectors. 

This action isolated the Iberian Peninsula to stop the instability from extending into Central Europe, Ramdas noted.

Due to a simultaneous generation failure, Portugal experienced a sudden disconnection from external power sources, leading to an immediate energy shortage.

“Spain, likewise, lost both French imports and its own internal supply, creating a shortfall of more than 10,000 MW during the event,” Ramdas said.

France’s critical role

France played a critical role in Monday’s power crisis. 

Rystad said even though France’s grid remained stable, the sudden drop in power demand from Spain and Portugal forced the country to lower power generation and re-route its energy flows. 

The reported shutdown of France’s Golfech Nuclear Power Plant in the Occitanie region occurred around 12:30-12:45 p.m., coinciding with the Iberian outage. 

This simultaneous event suggests a probable connection via a grid-wide frequency disturbance, according to the Norway-based energy consultancy. 

Following a partial restoration of stability in Spain, France recommenced limited exports to aid in the country’s recovery.

By late afternoon, France could resume exports to Spain. 

This action facilitated grid rebalancing and consequently enabled Spain to assist Portugal via secondary interconnections, according to Rystad Energy.

Power was partially restored across the Iberian Peninsula by the end of Monday. 

However, a critical two–to–three–hour supply-demand gap left millions without electricity, underscoring the region’s increasing dependence on cross-border balancing. 

This grid stress caused Spain’s net power exchange to shift from exporter to importer, while Portugal’s complete reliance on imported power revealed a deficit in domestic flexibility and storage.

France’s grid, stable, diversified, and somewhat insulated, showed its advantages but struggled to manage flow adjustments without prior warning, according to Rystad. 

“Although France managed the situation better, it still faced difficulties in managing unexpected electricity flows,” Ramdas said.

This disruption serves as a clear warning: without stronger domestic resilience and improved regional coordination, future grid failures could have even more severe consequences.

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Brazil’s central bank has warned of a sharp drop in corporate profitability as the country’s aggressive monetary tightening begins to ripple through the broader economy.

In its latest Financial Stability Report, released Tuesday, Banco Central do Brasil projected that the median Return on Equity (ROE) for publicly listed non-financial companies could decline to just 3.92% by September 2025, compared to 8.92% in September 2024, when the current rate-hiking cycle began.

If the forecast proves accurate, it would mark the lowest ROE since September 2017, when Brazil was still recovering from a deep recession triggered by fiscal instability, political turmoil, and a global commodity downturn.

The projected ROE is also worse than during the COVID-19 crisis, which saw profitability fall to 5.54% in mid-2020.

While the bank noted that the impact may be less severe than during the 2015–2016 recession, it stressed that “corporate payment capacity is expected to decline significantly in the short term.”

Selic hikes pressure on corporate earnings

The central bank has lifted the benchmark Selic rate by 375 basis points to 14.25%, pursuing an aggressive stance against inflation.

As of mid-April, annual inflation remained elevated at 5.49%, well above the 3% target, prompting expectations of another hike in May.

Although the tightening has moderated inflationary pressures, it has also raised borrowing costs, hitting corporate profit margins and returns.

The central bank faces a delicate balancing act: reining in inflation without choking off economic activity.

So far, corporate Brazil appears to be bearing the brunt of the adjustment.

Red flags in household credit markets

While corporate credit demand is cooling, the central bank flagged emerging risks in the residential and consumer credit markets.

Credit to households grew in late 2024, particularly among higher-risk and lower-income borrowers, despite elevated interest rates.

Auto loans surged, with more consumers financing older vehicles and making smaller down payments, raising concerns about deteriorating credit quality. Unsecured personal loans also rose, suggesting a loosening of lending standards.

Though financing to the real economy continued to expand, the central bank noted that lenders are becoming more cautious in 2025.

A quarterly survey showed declining risk appetite due to rising household debt and fragile small business finances.

Despite stable overall credit conditions, the central bank warned of potential instability, calling for “increased caution and vigilance” in lending practices.

With another rate hike on the horizon, corporate and consumer sectors alike could face renewed pressure in the months ahead.

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The Mediterranean Sea is nearing a critical deadline set by the International Maritime Organization (IMO) to lower bunker fuel sulfur limits. 

While the region was designated an Emission Control Area (ECA) nearly a year ago, maintaining this status will necessitate the near-total elimination of very low sulfur fuel oil (VLSFO) from vessels operating there, Rystad Energy said.

Rystad Energy forecasts that ultra-low sulfur fuel oil (ULSFO) is projected to become the dominant fuel in the Mediterranean Sea, contingent upon the IMO regulations being fulfilled.

Little room for VLSFO

“The inclusion of the Mediterranean Sea to the existing ECA zones leaves very little room for VLSFO in Europe. Now, vessels operating in the Mediterranean Sea must reduce sulfur limits to 0.1% from the previous level of 0.5%,” Valerie Panopio, vice president, commodity markets analysis – oil at Rystad Energy, said in an emailed commentary. 

We believe that VLSFO will be displaced by ULSFO, marine gas oil (MGO), and high sulfur fuel oil (HSFO) resulting in a reshuffling of bunker fuel flows and optimization of vessel fleets.

The global maritime authority, IMO, had set a firm deadline to drastically cut the sulfur content in ship fuel in the Mediterranean Sea, which had been an Emission Control Area for nearly a year. 

This new phase mandated a near-total ban on very low sulfur fuel oil (VLSFO). Energy analysts anticipated a swift shift to ultra-low sulfur fuel oil (ULSFO) if the regulations were strictly enforced. 

Faced with stricter IMO regulations mandating a near-total ban on VLSFO and a reduction of sulfur limits to 0.1%, ship operators in the Mediterranean have several potential responses. 

These include switching entirely to 0.1% sulfur fuels, using different fuels depending on location, investing in scrubbers, exploring alternative fuels like LNG, biofuels, and hydrogen, or even choosing routes that bypass the Mediterranean Sea, Rystad said. 

The choices made by these ships will determine the environmental future of the sea.

“We believe that this regulation of bunker fuel will result in a surge in compliant fuel demand, particularly in MGO,” Panopio added.

Challenges

Each of these choices presents distinct difficulties.

“Tighter emission controls in the Mediterranean will force vessel operators to revisit strategies on fuel supply and fleet routes, investment on exhaust gas cleaning systems, or “scrubbers”, and exploration of alternative fuels,” Panopio said. 

Vessels equipped with open-loop scrubbers must comply with local rules regarding the disposal of their scrubber wash water.

Using distinct fuels demands significant crew training to guarantee correct segregation and flushing methods are implemented.

This is crucial to prevent stability problems and cross-contamination, the Norway-based energy consultancy said.

Meanwhile, due to intermittent Houthi attacks in the Bab-el-Mandeb strait over the last year, vessel traffic through the Mediterranean Sea has decreased.

Avoiding the Mediterranean

According to Rystad Energy analysis, during the initial four months of 2025, large tankers like VLCCs and Suezmaxes accounted for a mere 10% of the ships navigating the Mediterranean Sea.

To avoid the significant risk premium associated with the Red Sea route, vessels are choosing the longer passage around the Cape of Good Hope.

Panopio said:

This indicates that the majority of the ships operating in the region are smaller vessels that are most likely already using MGO as fuel.

The increased adoption of MGO bunkering suggests a probable surge in its utilization as regulatory measures become more stringent.

Between Q3 2024 and Q1 2025, Port of Rotterdam bunkering data indicates a 67,000 bpd increase in MGO bunkering alongside a 48,000 bpd decrease in VLSFO bunkering, Rytsad said.

The limited refining complexity in the region and across Europe restricts the capacity to produce ULSFO, according to Panopio.

ULSFO can be transported from regions like the Middle East to Mediterranean entry and exit points, exemplified by recent ULSFO shipments from the UAE to Turkey.

Panopio noted:

The rerouting of fuel flows will open an arbitrage of VLSFO from Europe to the East of Suez, catering to Asia’s shortage and depressing VLSFO cracks in the short term. 

Additionally, Rystad also anticipates stable HSFO demand, with a possible increase due to the economic advantage of using scrubbers over the costlier ULSFO.

This is expected to gradually increase the number of vessels equipped with scrubbers.

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In a significant, albeit discreet, policy adjustment, China has reportedly created a list of specific US-made products eligible for exemption from its steep 125% retaliatory tariffs.

According to a report in Reuters, Beijing is quietly notifying select companies about the existence of this “whitelist”, rather than making a public announcement, according to two sources familiar with the situation, who requested anonymity due to the sensitive nature of the information.

This signals a growing concern about the economic consequences of its protracted trade war with Washington.

This behind-the-scenes approach allows China to offer targeted relief to its industries while maintaining its firm public stance.

Officially, Beijing has consistently stated its readiness to endure the trade conflict unless the US retracts its own significant tariffs (reportedly as high as 145% on some goods).

However, the creation of an exemption list suggests a pragmatic recognition of the economic pain rippling through the country.

The existence of such a “whitelist,” where specific goods are pre-approved for exemption, had not been previously reported, although Reuters did report on Friday that China was asking firms to identify critical goods needed levy-free, following earlier exemptions granted for select items like pharmaceuticals, microchips, and aircraft engines.

Targeted relief: notifications and growing list

The exact scope and contents of the exemption list remain unclear, as it has not been made public by the authorities yet.

Instead of a broad declaration, companies are being contacted privately by government authorities and informed about product classifications eligible for tariff waivers.

According to the report, one source, working at a pharmaceutical company reliant on US technology for some products sold in China, confirmed their company was contacted by the Shanghai Pudong government on Monday regarding the list.

The source noted the firm had previously lobbied for exemptions. “We still have many technologies we need from the US,” Reuters reported quoting the person who also highlighted the practical need for certain American imports despite the ongoing trade dispute.

Another source indicated that some companies are being advised to privately inquire with authorities to determine if their specific imported products qualify for inclusion on the exemption list.

The report further stated that as per the evidence, the list of exempted goods may be expanding.

On Tuesday, Reuters reported that China has also waived tariffs on crucial imports of ethane, a petrochemical feedstock, from the United States.

Major ethane processors had previously sought these waivers, given that the US is effectively the sole viable supplier for their needs.

Economic pressure prompts pragmatism

These quiet concessions underscore the significant economic pressures China faces.

Weak domestic demand, a consumer sector yet to fully recover post-pandemic, and broader deflationary concerns create a challenging environment exacerbated by the trade war.

While Beijing encourages tariff-hit exporters to pivot domestically, companies report difficulties with lower profits and less reliable demand in the local market.

Offering targeted tariff exemptions provides a more direct mechanism to support struggling industries and maintain critical supply chains.

This mirrors steps taken by Washington, which also granted exemptions for some Chinese goods, acknowledging the reciprocal nature of trade war pain.

Gauging the fallout: government surveys businesses

Beyond granting exemptions, Chinese authorities are also actively trying to quantify the trade war’s impact.

In the report, two separate sources confirmed that the government is surveying companies to gauge the effects of the tariffs.

Authorities in Eastern China recently met with a foreign business lobby group, asking them to “communicate all critical situations caused by tariff tensions to evaluate specific cases,” according to one person with direct knowledge.

Similarly, officials in the major port and manufacturing city of Xiamen reportedly sent out surveys on Sunday to electronics and textile firms, inquiring about their US trade activities and the estimated impact of both US and Chinese tariffs on their businesses.

While these internal assessments and quiet exemptions proceed, the broader trade narrative continues.

US President Donald Trump remarked on Tuesday that he believed a trade deal with China was achievable, adding, “But it’s going to be a fair deal.”

China’s commerce and customs ministries did not provide immediate comment when contacted by Reuters.

The discreet nature of the exemption process highlights Beijing’s complex balancing act between projecting strength and addressing pressing economic realities.

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Global automakers are dialling back profit forecasts and suspending guidance as tariff tensions, weakening margins from electric vehicles, and mounting global competition cast a shadow over the industry’s near-term prospects.

From Volkswagen and Mercedes-Benz to Stellantis and Aston Martin, companies are warning that US trade policy under President Donald Trump, combined with rising production costs and shifting consumer demand, is making it increasingly difficult to chart a clear financial path forward.

Volkswagen cuts profit forecast as EV shift and trade turmoil hit margins

Germany’s Volkswagen said on Wednesday it expects annual operating profit at the bottom end of its previous forecast.

The world’s second-largest automaker now expects full-year operating return on sales closer to 5.5%, down from earlier projections.

Net cash flow is also anticipated at the lower end of its €2 billion to €5 billion range, with net liquidity forecast to hover around €34 billion ($38.7 billion).

Volkswagen’s first-quarter earnings dropped by 40%, as margins were squeezed by an ongoing transition to battery-electric vehicles (BEVs), whose production remains significantly less profitable than combustion engine cars.

“Battery-electric vehicle sales more than doubled in Europe during the first quarter, but this came at the cost of reduced margins,” the company said.

Chief Financial Officer Arno Antlitz acknowledged the challenges, saying: “We need to ensure a competitive cost structure alongside our strong offering of vehicles to stay successful in a rapidly changing world.”

Mercedes-Benz withdraws full-year guidance

Volkswagen’s caution was echoed by rival Mercedes-Benz, which pulled its earnings guidance for the year, citing “current volatility” stemming from US President Donald Trump’s renewed tariffs on imported vehicles.

The German luxury carmaker reported a 41% drop in group earnings before interest and taxes (EBIT) to €2.3 billion in the first quarter.

Car and van sales fell 7%, including a 10% slump in Europe and China. Only the US market showed resilience, with a 1% sales rise.

Profit margin for its cars division dropped to 7.3% from 9% a year earlier.

“The current volatility with regard to tariff policies, mitigation measures and potential direct and indirect effects on customer behavior is too high to reliably assess the business development for the remainder of the year,” Mercedes said in a statement.

Assuming tariffs remain in place, the company warned its profits would be “negatively impacted.”

At the end of March, the carmaker told analysts it had been stockpiling inventory in the US to cushion against potential tariff shocks.

Mercedes CFO added that any additional tariff impact in 2025 could reduce car margins by up to 300 basis points.

Stellantis suspends recovery guidance after sharp profit drop

Stellantis, maker of Jeep and Peugeot vehicles, on Wednesday suspended its outlook for a moderate recovery this year after suffering a 64% drop in adjusted operating profit in 2024.

First-quarter revenues declined 14% year-on-year to €35.8 billion ($40.7 billion), broadly in line with market expectations.

The carmaker said evolving US tariff policies created too much uncertainty to maintain its previous forecast.

Stellantis also reported burning over €6 billion in cash last year, deepening concerns about its financial resilience in a prolonged trade dispute.

Volvo Cars withdraws forecast, Aston Martin to limit exports to US

Volvo Cars on Tuesday withdrew its earnings forecast for the next two years, also citing the unpredictable impact of the US tariff regime.

Meanwhile, British luxury carmaker Aston Martin reported a narrower-than-expected loss in the first quarter and said it would limit vehicle exports to the US to mitigate the effects of the new 25% tariffs on imported cars and parts.

The company posted an adjusted pretax loss of £79.8 million ($106.8 million) for the three months ended March 31, better than analysts’ expectations and significantly lower than the £110.5 million loss it posted a year ago.

While the luxury segment has some pricing power, Aston Martin acknowledged that tariff-related disruption remains a significant headwind.

Trump eases auto tariffs in bid to support domestic manufacturing

Meanwhile, President Donald Trump on Tuesday signed executive orders easing some of his previously imposed 25% tariffs on automobiles and auto parts.

“We just wanted to help them during this little transition, short term,” Trump told reporters, emphasizing that the administration did not intend to penalize manufacturers.

The move, according to Treasury Secretary Scott Bessent, is designed to enable carmakers to accelerate domestic production.

“President Trump has had meetings with both domestic and foreign auto producers, and he’s committed to bringing back auto production to the US,” Bessent said during a White House briefing.

So we want to give the automakers a path to do that, quickly, efficiently and create as many jobs as possible.

One of the executive orders amends the 25% auto tariffs to provide limited relief for US-assembled vehicles that incorporate foreign parts.

Under the new policy, eligible vehicles will receive a one-year rebate worth 3.75% of the vehicle’s sales price, reflecting the estimated tariff burden on foreign-made parts making up 15% of that cost.

In the second year, the rebate will shrink to 2.5%, aligned with a reduced share of imported components.

A senior Commerce Department official, speaking on condition of anonymity, said carmakers had lobbied the administration for more time to adjust supply chains and build new facilities.

The official said manufacturers are expected to announce new hiring, shift expansions, and additional factory plans in the coming weeks, AP reported.

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