Global Risk Indexes (06-02-2025)

Global 98 (0 —)
MENA 98 (+1 ▲)
APAC 97 ( —)
Europe 98 ( —)
Africa 96 (-1 ▼)
AMERs 98 ( —)
Markets 99 (+1 ▲)
Graham Westcott, Global Markets region analyst at Worldwise Analytica

Graham Westcott

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

Trade Wars, Energy Disruptions, and AI Decoupling: The Global Economy Faces Structural Shifts

The global economy is approaching a turning point as protectionism, energy realignments, and technological competition reshape international markets. The U.S. has expanded its trade war with new tariffs on key European exports, triggering concerns about broader economic fragmentation. Meanwhile, the energy sector is bracing for severe supply chain shocks, with Iran, Venezuela, and Russia facing intensified U.S. sanctions. Financial markets remain volatile, with investors shifting toward safe-haven assets amid uncertainty.

U.S. expands its trade war, escalating tensions with the EU, China, and North America. The Biden administration has imposed fresh tariffs on European steel, aluminum, and auto exports, citing national security concerns. This move comes on the heels of heightened restrictions on Chinese imports and the continuation of Trump-era tariffs on Canada and Mexico. The European Union is preparing countermeasures, with potential tariffs on U.S. agricultural products and technology sectors.

Markets react with sharp volatility as trade conflicts widen. The euro and British pound fell against the dollar as markets absorbed the impact of U.S. tariffs. European automakers, particularly BMW and Volkswagen, saw stock declines amid concerns over disrupted supply chains. Meanwhile, the Chinese yuan remains under pressure as Beijing weighs potential currency interventions to stabilize its economy.

Energy markets brace for supply disruptions as U.S. sanctions hit Iran and Venezuela. The Biden administration has reinstated full-scale sanctions on Iran, aiming to cut its crude exports to zero. In parallel, new restrictions on Venezuelan oil are expected to limit global supply. While Saudi Arabia and other OPEC nations may compensate, market uncertainty has pushed Brent crude to $81 per barrel. Further complicating the picture, ongoing attacks on commercial vessels in the Red Sea are disrupting oil and gas flows from the Middle East, adding further upward pressure on prices.

AI decoupling accelerates as China and the U.S. adopt divergent strategies. The DeepSeek AI shockwave continues to disrupt global technology markets, with China rapidly advancing in AI and semiconductor self-sufficiency. Washington is considering expanding export controls to restrict AI-related chip sales to Chinese firms. Meanwhile, major U.S. tech companies, including Microsoft and Nvidia, are urging the government to allow limited exports to maintain competitiveness. The battle for AI dominance is reshaping global investment flows, with venture capital shifting toward regions that offer the most stable regulatory environments.

The Federal Reserve faces a policy dilemma amid inflationary and economic pressures. U.S. inflation risks are rising due to higher import costs from tariffs, while global trade disruptions threaten economic growth. The Fed is signaling a cautious approach, with potential delays in rate cuts despite market expectations. Meanwhile, the ECB is under pressure to provide further stimulus as European economies struggle with weak demand and trade uncertainties.

Strategic Priorities for Investors and Policymakers:

  • Supply chain resilience must be a top priority as global trade realigns, forcing businesses to diversify sourcing strategies.
  • Energy market stability remains critical as geopolitical tensions drive volatility. Investors should monitor OPEC responses and alternative supply channels.
  • AI and tech investment shifts will define future global economic leadership, with China and the U.S. competing for dominance in innovation and semiconductor manufacturing.
  • Monetary policy challenges require close attention, as central banks balance inflation risks against slowing economic growth.

The global economic landscape is shifting toward regionalization, with long-term implications for trade, investment, and supply chain security. Investors and businesses must remain agile to navigate the evolving risks and opportunities.

Geopolitical Risk Assessment for the Global Markets
(06-02-2025)

The global economic landscape is experiencing unprecedented strain as trade wars escalate, energy supply chains are disrupted, and financial markets react to geopolitical instability. The U.S. is deepening its protectionist policies, triggering retaliatory measures from China, Canada, and Mexico. Meanwhile, the energy sector faces volatility due to heightened U.S. sanctions on Iranian and Venezuelan oil, alongside mounting risks in the Red Sea and the Russian energy market. The AI-driven technological decoupling between the U.S. and China is accelerating, with global investment realignments underway. Policymakers and investors must brace for sustained economic fragmentation, regional trade shifts, and structural inflationary pressures.

Geopolitical Risk Index

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

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