The Fog of Economic War
Ambiguity can be strategically useful.
By: Antonia Colibasanu
The “fog of war,” as it has come to be known, makes it impossible to make informed decisions under conditions of rapid change, deception and imperfect visibility.
If anything, modern military doctrine has accentuated the problem as more data, more sensors and faster communications often reduce uncertainty.
The same logic applies to the global economy.
Economic warfare today is waged by nation-states through tariffs and sanctions, export controls, investment screening, payment restrictions, cyber-enabled espionage, financial coercion and control over strategic chokepoints.
Unlike conventional military operations, these measures unfold through opaque supply chains, private intermediaries, fragmented legal systems and delayed market reactions.
Governments rarely have a full picture of how pressure will emerge in global networks.
Markets react before facts are fully known.
Firms hedge against risks that may never materialize.
Allies interpret signals differently.
In this environment, economic conflict is defined by strategic ambiguity.
If the current international environment is understood as a form of economic war, then the conditions for the fog of this war are already in place.
They appeared during the COVID-19 pandemic, were solidified after Russia’s invasion of Ukraine disrupted Black Sea logistics and energy markets, and intensified with the war in the Middle East.
(These developments unfolded alongside the long-running U.S.-China standoff in trade and technology.)
Together, they have transformed globalization from a system optimized for efficiency into a system organized around resilience, redundancy and geopolitical risk management.
Phenomena
A few distinct phenomena characterize the fog of economic war.
The first is information asymmetry.
Economic coercion operates partly through signaling.
Tariffs, sanctions and export restrictions are intended not only to inflict economic costs but also to communicate political resolve.
Yet the signal is often ambiguous.
A target state may struggle to determine whether a measure is a bargaining tactic, a first step toward escalation or simply a gesture made to domestic political audiences.
Meanwhile, the sender frequently lacks reliable information about the target’s capacity to absorb losses, substitute suppliers or mobilize political resistance.
This creates a fundamentally unstable environment for decision-making.
Sanctions regimes, for example, often preserve ambiguity to maximize deterrence.
The U.S. Treasury’s Office of Foreign Assets Control frequently relies on contextual standards such as “significant transactions” rather than rigid numerical thresholds.
Ambiguity increases compliance pressure because firms avoid even potentially legal activities out of fear of future penalties.
But it also generates overcompliance, diplomatic misunderstanding and unintended economic fragmentation.
The result is structural data incompleteness.
In the semiconductor sector, the Organization for Economic Cooperation and Development has warned that trade statistics provide only a partial picture of supply chain vulnerability because the industry is fragmented across highly specialized production stages and jurisdictions.
Policymakers may know the value of a trade flow without understanding whether the underlying component is substitutable, time-sensitive or effectively irreplaceable.
The second phenomenon is espionage and attribution problems.
Economic warfare overlaps with intelligence operations and cyber conflict.
U.S. counterintelligence agencies have repeatedly described foreign economic espionage as one of the most persistent threats to national competitiveness, particularly in cyberspace.
Yet cyber attribution is probabilistic, not definitive.
Governments act on intelligence assessments that cannot be fully disclosed publicly.
As a result, markets and private actors are asked to respond to partially revealed evidence.
Decisions about whether a telecommunications company represents a national security threat, whether software possesses dual-use military applications, or whether a cyber intrusion constitutes commercial theft or strategic preparation for sabotage are rarely transparent.
Public understanding becomes fragmented, while firms are forced to price risk on the basis of incomplete information.
The third phenomenon is market mediation.
Unlike military operations, economic coercion rarely produces immediate and visible outcomes.
Tariffs affect contracts before they affect production.
Supply chain disruptions move through inventories, sourcing strategies and investment decisions over time.
Financial sanctions can generate instant payment problems, but their deeper macroeconomic consequences emerge later through reduced financing access, technology restrictions and declining investor confidence.
Trade policy uncertainty depresses trade flows and delays investment because firms postpone irreversible commitments when future rules become unclear.
Analyses from the International Monetary Fund show that restrictions spread through expectations, capital flows and financing conditions, not merely through directly targeted goods.
The time lag is such that governments struggle to determine whether a policy is working strategically or merely generating temporary distortions.
Markets move faster than policymakers can evaluate consequences.
The fourth is adaptation.
Modern global trade networks are too decentralized for bilateral coercion to remain bilateral for long.
Supply chains reroute.
Components are repackaged through third countries.
Payments are divvied up among various currencies and institutions. Commodities are blended, relabeled or redirected through intermediary hubs.
Research on the 2018-2019 U.S.-China spat demonstrated that “decoupling” often meant rerouting through countries such as Vietnam and Mexico rather than genuine separation of supply chains.
The bottom line is that economic pressure rarely eliminates activity outright.
Instead, it pushes activity into less transparent channels.
The final phenomenon is strategic ambiguity.
Measures aimed at adversaries often affect allies, neutral states and domestic industries.
Secondary sanctions have caused banks to reject licit transactions because compliance departments fear regulatory exposure.
Tariffs imposed for strategic reasons raise costs for domestic firms dependent on imported inputs.
All of this makes strategic assessment more difficult.
But the ambiguity is amplified by the growing overlap between economic conflict and information warfare.
Intelligence communities have long emphasized denial and deception as core features of strategic competition.
Today, digital influence campaigns shape investor sentiment, market expectations and corporate risk perceptions even as they shape political narratives.
Test Cases
The ongoing crisis surrounding Iran and the Strait of Hormuz offers perhaps the clearest contemporary example of economic fog operating at a global scale.
Recent reporting suggests that negotiations involving the U.S., Iran and regional mediators remain tied to reopening the Strait of Hormuz and broader sanctions relief.
Yet energy markets continue to react to military developments, diplomatic signaling and uncertain shipping conditions before any formal settlement exists.
The U.S. Energy Information Administration’s May 2026 outlook assumed that disruptions in Hormuz would continue to tighten global supply conditions and accelerate inventory drawdowns.
Oil prices have fluctuated sharply with every new report about negotiations, military strikes and tanker movements.
At the same time, the information environment itself has become unstable.
GPS interference, AIS spoofing, dark vessels and disrupted communications complicate efforts to assess the true state of maritime traffic.
Businesses struggle to distinguish between genuine closure, partial reopening, convoy protection effects and self-deterrence by shipping companies or insurers.
In other words, military operations, insurance pricing, diplomatic negotiations, commodity speculation and shipping logistics all interact simultaneously before the legal or political framework is clear.
The sanctions architecture surrounding Russia demonstrates another dimension of economic fog.
Western restrictions raised Russian financing costs and reduced some revenue streams, but they have also generated an entire ecosystem dedicated to their circumvention.
The EU and the U.S. have repeatedly expanded restrictions on shadow fleets, intermediary financial institutions and alternative payment mechanisms, but each new layer of enforcement creates additional uncertainty for firms, banks, insurers and logistics operators.
(The price cap on Russian oil was, itself, ambiguous.
Oil needed to continue moving but under controlled financial conditions.)
Over time, enforcement challenges expanded into services and finance.
Compliance questions increasingly revolve around intermediary exposure, beneficial ownership structures, payment routing systems and indirect participation in restricted transactions.
In practice, the central problem of sanctions enforcement has evolved from “Is this Russian?” to “What hidden network enabled this transaction?”
The semiconductor and critical minerals sectors connect the Russia, China and Hormuz cases into a single picture of structural vulnerability.
Critical minerals add another layer of concentration risk.
China dominates the global production of materials such as gallium and germanium – both essential for advanced electronics, telecommunications and defense systems.
This concentration means that even modest export restrictions or licensing delays can cascade throughout seemingly unrelated sectors.
The strategic significance of export controls lies not only in direct denial of access but in uncertainty itself.
Firms delay investment when future licensing conditions become unpredictable.
Supply chain managers build redundancies at higher costs.
Governments subsidize domestic production because future uncertainty has become strategically intolerable.
Pricing
One of the clearest signs that economic fog has become systemic is that uncertainty itself is now being priced into the global economy.
The IMF has noted that new trade restrictions have more than tripled since 2019, while geopolitical risk indicators surged following Russia’s invasion of Ukraine.
Corporate earnings calls increasingly cite fragmentation, supply chain resilience and political uncertainty as core business variables.
Economic fog now appears in inventories, warehousing costs, supplier duplication, insurance premiums, working capital requirements and the discount rates applied to cross-border investments.
In practical terms, firms are moving from country-risk management to network-risk management.
It is no longer enough to know whether a supplier is located in China, Russia or Iran.
Strategic visibility increasingly requires understanding second- and third-tier suppliers, payment routing systems, maritime service dependencies, software origin chains and beneficial ownership structures.
Ambiguity can be strategically useful for nation-states conducting war.
But ambiguity in economic warfare becomes counterproductive when allies, firms and financial institutions cannot determine what is permitted, what is licensable or what will trigger punishment.
At that point, uncertainty itself becomes economically destructive.
And as geopolitical competition deepens, the ability to navigate uncertainty may become more important than the ability to predict outcomes themselves.
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