Geopolitics is now an entrenched risk to markets and the global economy
A series of interconnected crises has ushered in a period of significant uncertainty, volatility, and fragility affecting the global economy and markets. The ongoing war in the Middle East, Russia’s invasion of Ukraine, and escalating tensions between the United States and China, have expedited the process of geopolitical fragmentation.
A post-Cold War era marked by constructive major power relations is now over, having been replaced by intense rivalry among influential actors espousing disparate ideals and world views. We are witnessing an unprecedented number of unstable situations where matters of war and peace are precariously balanced.
Increased volatility has led to a greater emphasis on national security and resilience, especially in the absence of significant technological advancements in productivity. This realignment carries the potential to impact both output and inflation in the long run. BlackRock’s Geopolitical Risk Indicator, measuring market attention to geopolitical risks, stands at its highest level in a year. There is growing apprehension among investors about the various risks abounding today and looming on the horizon.
The vicious October attack by Hamas on Israel, and Israel’s unforgiving retaliatory strikes, have markedly heightened tensions in the…
