Geopolitical risk assessment for October 2024

The current geopolitical landscape is shaped by a multitude of complex factors, and assessing the risk level requires considering several regional and global dynamics. Below are the major components influencing the situation in late 2023 and into 2024:

1. U.S.-China Relations:

• Tensions over Taiwan: Taiwan remains a flashpoint in U.S.-China relations. China’s military drills near the island and the U.S. strengthening its support for Taiwan could lead to potential escalation.

• Economic Rivalry: The U.S. and China are in a technological and economic competition, with trade restrictions, export controls, and a push for semiconductor independence becoming central.

• Global Influence: Both nations are trying to expand their influence globally, especially in Africa, Asia, and Latin America. China’s Belt and Road Initiative and the U.S.’s countermeasures like the Indo-Pacific Strategy reflect this geopolitical contest.

Risk Level: Moderate to High. Although a direct military confrontation is unlikely, miscalculations over Taiwan or cyber warfare pose a significant risk.

2. Russia-Ukraine War:

• Prolonged Conflict: The war continues, with Ukraine holding firm and receiving Western military aid, while Russia attempts to sustain its offensive despite sanctions. The potential for this war to drag on is high, with little chance of short-term resolution.

• Nuclear Tensions: Russia’s rhetoric regarding nuclear weapons adds a layer of unpredictability, especially with Western nations directly supporting Ukraine.

Risk Level: High. There is ongoing risk of escalation, particularly if NATO nations become more directly involved, or if the conflict spreads beyond Ukraine.

3. Middle East Instability:

• Israel-Palestinian Conflict: The recent conflict between Hamas and Israel has significantly escalated tensions in the region. Israel’s ongoing military operations in Gaza, and its repercussions for broader regional dynamics, especially involving Iran, Hezbollah, and other actors, are worrisome.

• Iran: Iran’s nuclear ambitions and its role in proxy conflicts across the region, such as in Yemen, Syria, and Iraq, continue to pose security risks. Its growing relationship with Russia and China further complicates the geopolitical picture.

• Saudi Arabia and U.S. Relations: Saudi Arabia’s evolving position, including discussions of normalization with Israel and the re-balancing of its relations with global powers like China and Russia, will influence Middle East stability.

Risk Level: High. Multiple flashpoints exist, including the risk of wider regional war involving Israel, Hezbollah, and potentially Iran.

4. Global Economic Fragility:

• Energy Crisis: The ongoing war in Ukraine, coupled with tensions in the Middle East, has led to uncertainty in global energy markets, particularly with oil and gas supplies.

• Inflation and Debt: Rising inflation, debt crises in developing nations, and recession fears in the West add to the potential for economic instability, which can lead to political unrest.

• Food Security: Global food prices remain volatile due to disruptions caused by war, climate change, and trade restrictions, particularly affecting the Global South.

Risk Level: Moderate. Economic pressures may fuel political instability, especially in vulnerable regions.

5. Europe and NATO:

• NATO Expansion: Sweden and Finland’s inclusion in NATO, alongside the military alliance’s growing assertiveness near Russia’s borders, could provoke further confrontations with Moscow.

• Eastern Europe: Poland, the Baltic states, and other Eastern European nations remain on high alert, fearing spillover from the Ukraine conflict and Russia’s destabilizing efforts.

Risk Level: Moderate. The risk of conventional warfare remains low, but regional instability and hybrid threats like cyberattacks are more likely.

6. Africa:

• Political Instability: Coups in Niger, Mali, Burkina Faso, and Sudan, along with insurgencies, show increasing instability in parts of Africa. External actors like Russia (via the Wagner Group) are becoming more influential in some regions.

• Resource Competition: China, Russia, and Western nations are competing for access to Africa’s resources, which may lead to proxy conflicts.

Risk Level: Moderate. Political instability and external interference could lead to localized conflicts with broader implications.

7. Climate Change and Natural Disasters:

• Geopolitical Impacts: Climate-induced migration, resource shortages, and extreme weather events are exacerbating existing geopolitical tensions. Countries in South Asia, sub-Saharan Africa, and island nations are particularly vulnerable.

• Climate Diplomacy: The global push for decarbonization is reshaping energy geopolitics, especially with fossil fuel-dependent nations in the Middle East and elsewhere navigating this transition.

Risk Level: Moderate. Long-term consequences of climate change could exacerbate political instability and migration crises.

Conclusion:

• Global Risk Level: Moderate to High. While the possibility of global superpower conflict remains low in the near term, the combination of localized wars, economic instability, and political upheavals creates significant risks. Key flashpoints—Taiwan, Ukraine, the Middle East—could escalate rapidly, while indirect conflict through cyber warfare, economic pressure, and hybrid tactics remains likely.

The interconnectedness of these issues means that instability in one region can quickly affect others, increasing overall geopolitical risk. On the other hand, the financial and crypto markets remain moderately optimistic, with no higher risk of a larger correction.

Trading Barracuda risk assessment team