Economic Events and ForexJan 27, 20265 Min

Geopolitical Risk Tracker: The Flashpoints Keeping Investors Awake

When tensions rise, global markets never rest. The global geopolitical risk tracker 2025 shows that the markets today are facing more challenges than ever before. As these challenges continue to affect markets, investors will have to manage their portfolios actively.

Investor sentiment shifts with each new trend and challenge, keeping them awake at night. This uncertainty has given rise to a new generation of investment portfolios built for resilience as much as returns. The question is not whether these flashpoints matter, but which ones will have the greatest impact.

Real Financial Cost of Geopolitical Risk

Geopolitical risk has a direct impact on global financial markets. For example, the war between Russia and Ukraine led to a 29.1% drop in Ukraine’s GDP in 2022. Russia’s GDP fell by 2.6% in the same year.

These global security risks are not limited to one area. They cause ripple effects that impact supply chains, inflation, and market volatility worldwide. As international relations continue to deteriorate with rising global conflict zones, projections for world GDP growth decreased from 3.5% in 2022 to 2.9% in 2024. When global security threats rise, three main effects follow:

• Food and energy prices increase.
• Supply networks face disruptions, often from refugee flows.
• Investor sentiment goes down, leading to falling asset values.

In this environment, geopolitical awareness is no longer optional but essential. Investors who understand these shifts early can protect their portfolios, adjust risk exposure, and position themselves for opportunities that emerge even in turbulent times.

Conflict Impact Table

Major Flashpoints: Where Geopolitics Threatens Markets

The highest-risk areas for investors are where economic and military interests collide. These can be grouped into three main zones:

Taiwan Strait and South China Sea

1. 48% of institutional investors consider this region their biggest market risk for the next two years.​ It makes a critical geopolitical flashpoint.
2. $3.4 trillion in trade passes through the area each year.
3. 60% of China’s trade travels by sea, making it vital for China’s economic security.

Escalating Middle Eastern Conflict

1. 27% of investors see military conflict in the Middle East as the biggest global security market threat.
2. The Israel-Hamas conflict is currently the top conflict to watch.
3. Tensions between Iran and Israel could lead to attacks on energy or nuclear sites, causing new risks.

Ukraine-Russia Instability in Eastern Europe

1. Russia’s ongoing actions in Ukraine remain one of the most significant and far-reaching geopolitical threats globally.
2. Europe’s energy security is still at risk because of the conflict.
3. Less foreign funding makes Ukraine more vulnerable.

How Markets React to these Flashpoints

When geopolitical flashpoints hit unexpectedly, investor confidence evaporates, and markets can drop rapidly. Instability in major trade regions disrupts trust and triggers swift declines across global assets.

Risk aversion increases capital flight from equities into gold and U.S. Treasuries. Sanctions disrupt trade and hamper company profits, lowering stock prices. However, there are mixed effects. About a third of institutional investors intend to aggressively pursue new portfolio strategies in 2025, viewing geopolitical risk volatility as a positive opportunity vs a negative threat.

Investor Positioning for 2025

In 2025, investor positioning reflects a clear shift toward caution. While 33% of investors plan to take an aggressive, high-risk approach, nearly half (48%) say risk-mitigation efforts are dominating their strategies. Additionally, 51% cite geopolitical concerns as the primary factor shaping their investment decisions for the year.

Regional Conflict Intensity

Developing countries feel the most economic pain from rising regional conflicts. Regions of Europe & Central Asia and the Middle East & North Africa are the highest global conflict zones. The number of conflict events per million people in these regions has increased sharply between 2018 and 2025. A single flashpoint can destabilise a region and affect others through market links.

Other Notable Flashpoints

Here are the other notable flashpoints to consider in 2026:

• Red Sea and Gulf of Aden: Houthis' attacks on ships may bring a bigger U.S. and UK military presence.
• Korean Peninsula: North Korean weapons tests and border incidents are rare, but could be disastrous if fighting breaks out.
• Pakistan/Afghanistan Border: Military activity and unrest are rising as Taliban violence continues.
• Israeli/Palestinian Conflict (West Bank): Rising tensions between Israeli forces and Palestinians may spread further due to expanding settlements.

Geopolitical Risk Tracker and Response

Seerist and Bloomberg created a platform to track geopolitical risks for more than seven million companies. The geopolitical risk tracker 2025 can measure 29 types of threats at the country level. Risk managers can now see conflicts’ effects on their bond and equity portfolios in real time. Automation gives them quicker responses to new threats.

Now, risk managers can see the geopolitical flashpoints' market impact directly on the bonds and equity holdings within their portfolios. These scores are then automatically cascaded from the assessment made at the country level. The use of automation allows risk managers to have real-time responses to emerging threats affecting their portfolios.

Winning Strategies for a Volatile Market

Investors have a number of different strategies they can use in response to the wide variety of global security threats.​

New Opportunities:

• A number of data centres will be developed in response to changes in global hot spots for investors, with alternative energy being positioned as well.
• The long-term investment perspective is to treat volatility as an opportunity for entry into investments.

Challenges to Mitigating Risks:

• Approximately half of all respondents believe that there are so many global security threats facing them that they cannot be effectively mitigated.
• Limited geographic diversity exists in the current market due to the interconnected nature of the markets.
• Building redundant supply chains is expensive.

2026 Outlook

There is an ongoing geopolitical risk looming over the global markets and economies. While there are no signs that this problem has been resolved, there are reasons to believe that the unresolved issues, along with U.S.-China de-risking, are likely to continue to pose global security threats to asset holders.

This will be influenced by the U.S. administration’s policies toward China, which will likely affect the degree of tensions in the region throughout the year. In short, the situation is bleak. Investors who can measure the level of conflict using relevant data rather than headlines will be able to position themselves to survive the anxiety that keeps other people up at night.

Disclaimer: The information provided in this article is for educational and informational purposes only and should not be considered financial, investment, or trading advice.