Global Risk Indexes (31-01-2025)

Global 98 (+1 ▲)
MENA 96 (+1 ▲)
APAC 97 ( —)
Europe 99 (+1 ▲)
Africa 98 ( —)
AMERs 97 ( —)
Markets 99 (+2 ▲)
Graham Westcott, Global Markets region analyst at Worldwise Analytica

Graham Westcott

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

Trade Wars, AI Disruptions, and Energy Volatility: The Global Economy on the Brink of a Structural Shift

Trump's tariffs push global markets into uncertainty. With the deadline set for February 1, the U.S. administration's 25% tariffs on imports from Canada and Mexico threaten to disrupt $1.6 trillion in annual trade. While the move aims to pressure these nations on border security and fentanyl trafficking, its economic consequences are reverberating. The Mexican peso has weakened sharply, and Canada is preparing retaliatory tariffs, increasing the risk of a full-scale North American trade war. The auto, energy, and agriculture sectors are poised for significant disruptions, with manufacturers scrambling to adjust supply chains.

AI-driven market turbulence continues as China challenges U.S. tech dominance. The DeepSeek AI shockwave is prompting a recalibration in global technology markets, with Microsoft and Meta doubling down on AI investment. The Chinese AI firm's ability to develop advanced models at significantly lower costs is fueling fears of accelerated U.S.-China technological decoupling. Meanwhile, European regulators are tightening scrutiny on AI firms, raising compliance risks for global technology companies. The divergence in AI governance frameworks underscores the geopolitical stakes of technological leadership.

Energy markets brace for geopolitical realignments. Trump's potential inclusion of oil imports from Canada and Mexico in the tariff plan is adding to market instability. Brent crude prices remain volatile, hovering near $77 per barrel, as traders assess supply risks. U.S. sanctions on Russian energy exports are tightening global supply chains, while Saudi Arabia's strategic investments in the U.S. reflect its efforts to maintain influence amid shifting alliances. Meanwhile, the upcoming OPEC meeting on February 3 is expected to address concerns over U.S. policy shifts and their impact on global oil pricing mechanisms.

Eurozone stagnation worsens as ECB signals further rate cuts. With both Germany and France experiencing economic contraction, the eurozone is teetering on the brink of recession. The ECB's latest interest rate cut reflects growing concerns over sluggish growth, with further policy easing expected in the coming months. The divergence between the ECB's dovish stance and the Fed's more cautious approach is fueling volatility in currency markets, putting downward pressure on the euro.

Emerging markets navigate financial turbulence. Argentina's central bank is poised to cut interest rates amid cooling inflation, while Brazil faces continued inflationary pressures despite recent rate hikes. Capital flight from emerging markets is accelerating due to U.S. trade tensions and tighter global liquidity conditions. Mexico's economic contraction in Q4 2024 further underscores the vulnerabilities facing Latin America as geopolitical risks mount.

Strategic imperatives for navigating this complex environment are clear. Policymakers must focus on trade diversification, supply chain resilience, and strategic investments in critical industries. Investors should prioritize defensive sectors, including AI, cybersecurity, and renewable energy, while remaining cautious about industries exposed to tariff risks. The coming weeks will be pivotal in determining the trajectory of global trade realignments, energy markets, and technological leadership.

Geopolitical Risk Assessment for the Global Markets
(31-01-2025)

The global economic and financial landscape is being reshaped by intensifying trade conflicts, energy realignments, and disruptive technological shifts. The U.S. administration's tariff measures are triggering supply chain volatility, while global capital markets brace for inflationary aftershocks. The AI-driven economic transformation is deepening geopolitical competition, particularly between the U.S. and China. Long-term risks include systemic decoupling, persistent energy market realignments, and widening fractures in global trade frameworks. Investors and policymakers must prepare for an era of sustained uncertainty and economic nationalism.

Geopolitical Risk Index

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

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