Global Risk Indexes (05-01-2025)

Global 94 (+1 ▲)
MENA 98 ( —)
APAC 96 ( —)
Europe 96 (+1 ▲)
Africa 86 (+1 ▲)
AMERs 94 (+1 ▲)
Markets 95 (+3 ▲)
Graham Westcott, Global Markets region analyst at Worldwise Analytica

Graham Westcott

Navigating Global Intersections: Where Trade, Finance, Energy and Geopolitics Converge

Fragmented Economies and Geopolitical Realignments Define the Global Outlook for Early 2025

Global financial markets navigated a volatile start to the year, underscored by the U.S. dollar's persistent strength. Emerging markets bore the brunt of this trend, with the Mexican peso posting its steepest annual drop since 2008 and the Turkish lira under sustained pressure. These currency movements reflect the ripple effects of higher U.S. Treasury yields and a more hawkish Federal Reserve, complicating fiscal and monetary policy responses in developing economies.

Energy markets were dominated by geopolitical disruptions, with Brent crude prices climbing past $76 per barrel. Russia's cessation of gas exports via Ukraine and colder-than-expected weather in Europe intensified energy security concerns. While Italy pushed for an extended EU gas price cap, the lack of alternatives highlighted structural vulnerabilities. Saudi Arabia's potential price hike for Asian buyers reflects the Gulf's strategic leverage in the face of rising demand and geopolitical uncertainty in supply routes like the Red Sea.

Trade dynamics have been reshaped by escalating tensions under the Trump administration's proposed tariffs, including a potential 10% levy on all imports. This policy risks exacerbating supply chain disruptions and inflationary pressures, compounding the EU's deepening industrial recession. Meanwhile, China's proactive measures, including fiscal stimulus and auto export expansion into markets like Norway, illustrate strategic efforts to counteract tariff barriers and sustain economic momentum.

Technology competition has emerged as a key front in geopolitical rivalries. Taiwan's semiconductor funding cuts underscore vulnerabilities in global supply chains amidst intensifying U.S.-China decoupling trends. Similarly, Saudi Arabia and Abu Dhabi's sovereign wealth funds have increasingly pivoted toward AI and infrastructure investments, reflecting the Gulf's ambitions to lead in technological innovation and economic diversification.

Fiscal policies showcased regional divergences. Turkey's modest progress in lowering inflation to 44.38% highlights the challenges of stabilizing an economy under fiscal strain, while Saudi Arabia's non-oil growth reflects the potential of its Vision 2030 initiatives. In Europe, the delayed implementation of cohesive fiscal strategies continues to hinder resilience against external shocks, particularly in energy markets.

Market sentiment reflected growing fragmentation. U.S. equities saw modest gains driven by optimism in tech sectors, while European markets faced headwinds from energy price volatility and industrial slowdowns. Gold's steady performance underscored its enduring appeal as a safe haven amidst persistent inflationary concerns and geopolitical uncertainty.

This week's developments highlight the increasing fragmentation of the global economy, driven by systemic challenges in energy security, fiscal policy divergence, and trade realignments. Coordinated multilateral strategies are imperative to navigate these risks and foster long-term stability in an increasingly polarized geopolitical landscape.

Geopolitical Risk Assessment for the Global Markets
(05-01-2025)

The global economy remains in a precarious position as systemic risks linked to energy security, fiscal fragmentation, and trade disputes persist. Rising geopolitical tensions around resource control and technological competition exacerbate economic vulnerabilities.

Geopolitical Risk Index

Developments to Follow for the Global Markets (See All Global)

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