The interplay of energy security, economic interests, technological competition, and the global drive for sustainability has become increasingly complex. This complexity has shaped a new geopolitical landscape marked by rising conflicts and power struggles, as well as shifts in international cooperation. The implications of these tensions are far-reaching, extending beyond regional borders and impacting global markets and supply chains.
Geopolitical tensions manifest in many ways: acts of terrorism, trade and economic sanctions, visa restrictions, military threats, armed conflict, and regional or cross-border tensions. They can also take the form of a breakdown of international institutions and agreements. These disputes can impact national economies, disrupt global shipping operations, and trigger political instability.
An intermediate understanding of geopolitical tensions includes an analysis of the strategic interplay between state and non-state actors. Although national governments remain primary players, multinational corporations, international organizations like the World Bank or the International Energy Agency, and even global civil societies play important roles as well.
For example, the escalation of the US-China trade war has triggered fears about potential interruptions to key maritime routes, with European exporters worried that these disruptions could increase costs and lead to financial stress. Moreover, our consumer data show that consumers expect a prolongation of these geopolitical conflicts to significantly boost inflation and reduce expectations for economic growth. This is consistent with the supply shock nature of military conflict discussed in Federle et al. (2024).