Global Risk Indexes (17-01-2025)

Global 96 (0 —)
MENA 97 ( —)
APAC 98 ( —)
Europe 98 ( —)
Africa 91 (+2 ▲)
AMERs 97 (-1 ▼)
Markets 96 (+3 ▲)
Graham Westcott, Global Markets region analyst at Worldwise Analytica

Graham Westcott

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

Global Economic Fragmentation: Energy, Trade, and Debt Define 2025's Volatile Landscape

The global economy is undergoing a fundamental transformation, driven by an interplay of geopolitical ambitions, structural economic shifts, and emerging market vulnerabilities. U.S. tariff expansions targeting imports from China, Canada, and Mexico signal a return to protectionist policies that are already disrupting trade flows. The redirection of Chinese soybean imports to Brazil illustrates the rapid restructuring of global agricultural trade, reducing reliance on U.S. supply chains. This shift highlights the deepening economic decoupling between the world's two largest economies.

Energy markets are a nexus of geopolitical tensions and economic pressure. The U.S. sanctions on Russian oil and tanker operations have created bottlenecks in global energy flows, driving up prices and shipping costs. The situation is compounded by disruptions in the Red Sea, where Houthi attacks continue to destabilize one of the world's most critical maritime chokepoints. Iraq's capacity to scale oil and gas production provides a marginal buffer but is insufficient to counter broader supply constraints.

China faces mounting challenges that will redefine its role in the global economy. The country's declining population signals a long-term reduction in its labor force and domestic consumption, with ripple effects on global supply chains and trade partners. However, Beijing's use of anti-dumping measures and strategic overseas investments underscores its intent to secure economic resilience amid these demographic headwinds.

Fiscal fragility in advanced economies adds another layer of complexity. Italy's public debt exceeding '3 trillion exposes the eurozone to systemic risks, especially if market confidence deteriorates. Similarly, U.S. fiscal policy faces scrutiny from bond markets, where 'vigilantes' could reassert themselves, driving up borrowing costs and undermining the government's policy agenda.

Emerging markets are grappling with structural and fiscal challenges. Egypt's widening current account deficit, driven by Red Sea tensions impacting Suez Canal revenues, highlights the vulnerability of economies reliant on strategic resources. Meanwhile, Brazil's resilient economic activity reflects strong domestic consumption, but trade pressures from U.S.-China disputes threaten its export-oriented sectors.

Strategic adaptation is essential for navigating the shifting global order. Policymakers should focus on enhancing energy security, diversifying supply chains, and fostering regional cooperation to mitigate economic fragmentation. For investors, sectors like renewable energy, advanced technology, and critical minerals present opportunities aligned with these structural shifts.

Geopolitical Risk Assessment for the Global Markets
(17-01-2025)

Global markets are increasingly fragmented, as economic realignments are driven by intensified geopolitical conflicts, energy market disruptions, and structural challenges in major economies. The short-term landscape is marked by heightened volatility in trade and energy markets, exacerbated by U.S. tariff expansions, sustained Red Sea disruptions, and Europe's fiscal fragility. Long-term risks focus on China's demographic decline, technological decoupling, and the growing polarization of global alliances. Policymakers and investors must navigate a multipolar world order where economic policies are intrinsically tied to geopolitical ambitions.

Geopolitical Risk Index

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

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