Geopolitical risks are risks associated with international conflict, ranging from economic sanctions to a full-fledged war. On many fronts, geopolitical tensions have been rising in the last couple of years. US-Chinese relations have been deteriorating over trade and North Korea. The situation in the Middle-East remains explosive and affects commodity prices, whereas Europe is struggling with Brexit. And on top of these examples, the unconventional political approach of the Trump administration in combination with the global squeeze of dollar liquidity adds fuel to already smoldering geopolitical tensions.
An escalation of a geopolitical conflict can have potentially large adverse effects on economies. In the short term, financial markets and commodity prices (e.g. oil and food prices) respond to geopolitical events and ultimately these events can affect sentiment among consumers, producers and investors, which will materialise in lower economic activity. RaboResearch examines the economic consequences of geopolitical conflicts and conducts scenario analyses to quantify the impact in case of a possible escalation.
Read our studies on geopolitical risks.