A major escalation in Middle East tensions unfolded on 28 February 2026 as the United States and Israel launched coordinated military strikes targeting multiple locations across Iran, including sites tied to the country’s leadership and military infrastructure. Iran has responded with widespread retaliatory attacks that have spread across the region.

The joint offensive involved airborne and missile strikes on cities including Tehran, Isfahan, Qom, Karaj and Kermanshah. Key targets reportedly included compounds linked to senior leadership figures and command centres, though Iranian officials stated that the Supreme Leader was not present at the time of the attack.

Smoke and explosions were reported across Tehran and other urban areas, with communications disrupted in several districts of the capital. Authorities have not yet released full details regarding damage or casualties.

In response, Iran’s military launched a wave of ballistic missiles and drones toward US and Israeli targets across the Middle East. Sirens sounded in Israel as air defence systems were activated. Several Gulf states that host US military facilities, including Bahrain, Qatar, Kuwait and the United Arab Emirates, reported incoming projectiles and activated defensive measures.

Reports also indicated damage near US military installations in the region. Officials are still assessing the extent of impact and possible casualties.

Leaders on both sides have defended their actions. US and Israeli officials described the strikes as necessary for national security, while Iranian authorities said their retaliation was a legitimate response and warned that further action could follow.

The widening conflict has prompted several governments to issue travel advisories and restrict airspace, with airlines suspending or rerouting flights across parts of the Middle East.

Casualty figures remain unclear as the situation continues to develop. International leaders have urged restraint and called for diplomatic efforts to prevent further escalation.

Tehran, Iran — The conflict between the United States, Israel and Iran took a dramatic turn in the early hours of 28 February 2026 as coordinated strikes were carried out against Iranian military targets. Iran has since launched a series of retaliatory actions, heightening fears of a broader regional confrontation.

According to officials in Washington and Tel Aviv, the joint operation targeted multiple sites linked to Iran’s military infrastructure, including facilities in and around the capital, Tehran. In response, Iranian military forces have launched missiles, drones and other counter-strikes toward Israeli territory and US bases in the region.

Sirens sounded in parts of Israel as air-defence systems were activated in response to incoming threats. Authorities in several Gulf states — including Qatar, Saudi Arabia, Bahrain and the United Arab Emirates — also reported explosions and elevated alert levels amid growing uncertainty.

Inside Iran, daily life has been disrupted. The government closed Iranian airspace and issued public advisories urging citizens to remain calm while avoiding public gatherings. Schools and universities in major cities were ordered to suspend classes, and transportation services have been partially affected as authorities assess security risks.

International reactions have begun to emerge. Russia condemned the strikes as an “unprovoked act of armed aggression” and called for renewed diplomatic engagement. Iranian leadership appealed to the United Nations Security Council, asserting that the attacks violated international law and sovereignty.

Global governments are increasingly urging their citizens in the Middle East to seek shelter or temporarily leave affected areas. Several countries are reviewing travel advisories as airlines adjust flight routes in response to restricted airspace.

Meanwhile, reactions within Iran remain deeply divided. Some citizens expressed fear and concern over the escalating violence, while others — already critical of the current regime — saw the developments as potentially marking the beginning of political change. Social media posts captured both distress and cautious commentary, reflecting a population grappling with uncertainty.

As events continue to unfold, world leaders are monitoring the situation closely, warning that diplomatic channels must remain open to prevent further escalation. The coming hours and days are expected to be pivotal for the stability of the broader Middle East region.

Sri Lanka’s NPP Government is not merely drafting cybersecurity laws it is repositioning the island within a complex web of regional tech diplomacy, AI geopolitics, and cross-border security concerns. The digital economy push, still in its infancy, is unfolding simultaneously with delicate engagements involving India and Pakistan, exposing the strategic balancing act behind the policy narrative.

President Anura Kumara Dissanayake’s participation at the AI Impact Summit in India signalled Colombo’s recognition that artificial intelligence is no longer optional for governance or industry. Regional cooperation is increasingly vital as AI reshapes security doctrines, financial systems, and information warfare capabilities. Yet Sri Lanka enters this arena without a formalised national AI policy, relying instead on a broader cybersecurity strategy and ad hoc institutional development.

The proposed Cyber Security Bill seeks to create a central regulatory authority capable of enforcing compliance across critical infrastructure. Officials maintain that the move is essential as digitalisation accelerates  from online State services to cloud-based financial systems. However, the infrastructure foundation remains uneven, and digital literacy gaps persist across both public and private sectors.

Simultaneously, Sri Lanka has introduced a digital nomad visa programme aimed at attracting foreign technology professionals. The initiative promises foreign exchange inflows and knowledge transfer. But experts acknowledge that in a cloud-driven AI ecosystem, geographical presence is largely irrelevant to cyber risk. Malicious exploitation can originate anywhere, underscoring the limitations of border-based controls in digital governance.

Geopolitically, Colombo is walking a narrow corridor. Alongside strengthening technology engagement with India, discussions have also taken place with Pakistan on cybersecurity cooperation particularly in relation to narcotics trafficking networks that operate transnationally. Maintaining neutrality while deepening digital security ties with rival regional powers requires diplomatic precision.

Foreign policy officials stress that engagements are evaluated on technical merit and national interest rather than ideological alignment. Yet in South Asia’s charged security environment, even technical cooperation can carry strategic implications. Cybersecurity agreements often intersect with intelligence-sharing protocols and infrastructure dependencies, areas where sovereignty concerns can quickly surface.

At home, the Sri Lanka Unique Digital Identity (SLUDI) project exemplifies this tension. While authorities insist sovereign control will be preserved despite foreign technical involvement, the project highlights how digital infrastructure inevitably intersects with foreign expertise and supply chains.

The broader question is whether Sri Lanka’s digital ambitions are advancing faster than its institutional maturity. With no publicly articulated national digital policy, limited AI governance frameworks, and a nascent innovation ecosystem, the Government is attempting to construct regulatory, diplomatic, and technological pillars simultaneously.

If executed transparently and strategically, this multi-track approach could position Sri Lanka as a secure, neutral digital hub in the region. If mismanaged, it risks regulatory overreach at home and strategic entanglements abroad.

For a Government elected on promises of systemic reform, the digital domain presents both opportunity and peril. The coming years will reveal whether Sri Lanka can transform from a cautious adopter into a confident architect of its own digital future  without compromising sovereignty, neutrality, or economic competitiveness in an increasingly contested cyber landscape

Sri Lanka’s decision to gazette the Repatriation of Export Proceeds into Sri Lanka Rules No. 01 of 2026 through Extraordinary Gazette No. 2473/30 marks one of the most consequential foreign exchange policy shifts since the economic crisis. The move, approved by Cabinet and introduced under the authority of the Central Bank of Sri Lanka in terms of the CBSL Act No. 16 of 2023, is widely seen as a response to a persistent yet understated issue: the retention of export earnings in overseas accounts by some Sri Lankan exporters.

Sri Lanka generates between USD 15 and 17 billion annually from merchandise and services exports in a normal year. Apparel giants such as MAS Holdings and Brandix, tea exporters including Dilmah Ceylon Tea Company, and diversified conglomerates like Hayleys PLC collectively command billions in foreign currency inflows. Yet industry analysts estimate that during the peak of the 2021–2023 crisis, between 10 and 25 percent of export proceeds were either delayed in repatriation or retained abroad for working capital, debt servicing, or reinvestment. Even a conservative 15 percent retention translates into more than USD 2 billion annually not fully entering Sri Lanka’s formal banking system.

The economic consequences of this practice are profound. In 2022, official reserves fell below USD 2 billion at one point, contributing to sovereign default and severe import restrictions. While exporters argue that holding foreign currency abroad protects against exchange rate volatility and ensures uninterrupted import financing, the macroeconomic reality is that unreturned export proceeds tighten domestic dollar liquidity, increase pressure on the rupee, and compel the State to borrow externally at high cost.

The Government’s latest regulations seek to shift the equation from compulsion to incentive. By amending earlier 2024 rules, authorities are broadening access to local foreign currency denominated loan instruments, particularly Dollar Bonds issued through commercial banks. The first issuance on 10 December 2025 was limited due to regulatory constraints, but the revised framework aims to allow exporters themselves to invest repatriated funds directly into these instruments.

This strategy is economically rational. Encouraging exporters to park their dollars in local bonds rather than foreign banks could deepen the domestic foreign currency capital market and ease pressure on reserves. Redirecting even USD 1 billion into such instruments would significantly strengthen external buffers and reduce reliance on emergency funding.

However, regulation alone cannot solve what is fundamentally a confidence issue. Exporters cite abrupt policy changes, currency depreciation exceeding 80 percent during the crisis, and uncertainty in fiscal measures as reasons for maintaining offshore liquidity. Without sustained exchange rate stability, predictable tax policy, and credible monetary governance, compliance may remain technical rather than enthusiastic.

The Government’s move is a necessary corrective step, but its success will depend less on enforcement and more on rebuilding trust between policymakers and the private sector. In a fragile post-crisis economy, every export dollar matters, and ensuring those dollars circulate within Sri Lanka may prove decisive for long-term stability.

ACP Asset Management’s launch of a Europe-regulated Sri Lanka Opportunity Fund raises a pivotal question: is this a calculated entry into a mispriced recovery story  or a high-risk wager on a still-fragile frontier economy?

Marketed as the first UCITS-compliant vehicle dedicated exclusively to Sri Lankan assets, the Fund provides European investors with a regulated and liquid channel into a market that only recently exited economic crisis. The UCITS label carries weight in institutional circles, signalling adherence to stringent governance, transparency, and risk management standards.

ACP executives highlight past performance to bolster credibility. Their earlier Sri Lanka-focused strategy reportedly generated strong USD returns across 2023, 2024, and 2025, significantly outperforming the MSCI Frontier Markets Index. While historical returns can attract flows, frontier markets are notoriously cyclical and past outperformance does not insulate against renewed volatility.

The firm’s immediate $ 10 million seed capital and projected $ 35 million near-term inflow suggest early confidence among European investors, including delegates from German-speaking wealth management networks overseeing tens of billions in assets. The target of $ 100 million in assets within a year reflects expectations of sustained international interest.

The underlying thesis rests heavily on valuation compression. At roughly 11x price-to-earnings ratios, Sri Lankan equities are priced below many Asian peers. ACP argues this discount reflects crisis-era pessimism rather than forward-looking fundamentals. Reforms to taxation, energy pricing, and State-owned enterprises  along with improving tourism and export manufacturing — are presented as evidence of structural correction.

However, skeptics point to lingering vulnerabilities. Sri Lanka’s recovery remains dependent on external financing discipline, currency stability, and consistent policy execution. Political shifts or reform fatigue could erode investor sentiment quickly. Frontier liquidity constraints also amplify market swings, even within a UCITS wrapper.

The Fund’s diversified strategy  blending listed equities with sovereign and corporate bonds in both USD and local currency  attempts to mitigate concentration risk. A mandated 30% liquidity buffer offers daily redemption capacity, though actual market depth in stressed conditions could still be tested.

Comparisons have been drawn to frontier success stories such as Vietnam, where early-stage regulated funds helped channel foreign capital during periods of structural transformation. ACP Corum’s leadership suggests Sri Lanka could follow a similar trajectory if reform momentum persists.

ACP Asset Management’s broader footprint across emerging and frontier markets lends operational credibility. Nevertheless the Sri Lanka Opportunity Fund ultimately represents more than an investment product it is a referendum on the island’s reform durability.

If macro stability holds and growth reaccelerates, early entrants could reap outsized gains. If instability resurfaces, even European regulatory safeguards may not shield investors from frontier turbulence.