How the geopolitical situation can affect the market
Have you ever wondered how a geopolitical situation can affect the market?
In this article we will inform you about what geopolitics is, what its consequences may be and some narratives that have changed the course of the global economy.
1- What is geopolitics?
Geopolitics is the study of the relationships that exist between political power, terrestrial geography and international relations. It is influenced by factors such as natural resources, alliances, borders, conflicts, climate and demographics.
These factors are constantly changing and evolving, so understanding and anticipating certain situations can be essential for us to make our financial decisions.
2- How can the geopolitical situation affect the market?
A geopolitical situation can have a great impact on both local and international markets.
These are some ways in which the different geopolitical situations that affect the markets usually manifest themselves.
Uncertainty and volatility:
Some types of geopolitical situations tend to generate uncertainty in financial markets and investors, which can lead them to make certain decisions about their investments and make the market more volatile.
Political relations:
Political relations between countries can seriously affect companies located in the affected countries, since there may be changes in trade policies, affecting the export and import of products.
Price variation in commodities:
Uncertainty and geopolitical conflicts can affect the demand and supply of commodities such as oil, food and metals, affecting the variation in their prices globally.
Risk aversion:
When news is given that can negatively affect the market, investors become more cautious when investing, so there will be a decrease in investments, also generating volatility in the market.
Financial crisis:
Some types of geopolitical situations, such as a war or a financial crisis, can take us to certain extremes where there can be devastating effects on both the markets and the world economy.
3- How some geopolitical narratives have affected the market.
One of the most important geopolitical events that we have had in recent times and that has considerably affected the global economy has been the war between Ukraine and Russia, without forgetting the existing tension between China and the United States.
3.1- War conflict between Ukraine and Russia.
Since the war in Ukraine began on September 22, 2022, we have been able to observe how there was a great impact on the global economy, starting with food, which saw its supply reduced, which caused prices to rise to levels exorbitant
The energy market was also affected, since many countries and especially in Europe depended heavily on Russian imports, causing a crisis in the supply of gas, which caused inflation and the price of energy to rise. would rise.
The war between Russia and Ukraine has led us to great economic uncertainty worldwide and today more than a year has passed and we are still enduring the consequences of the war, both in the prices of cereals, fertilizers and energy, causing this the risk of a global recession.
Overall the invasion of Ukraine has had a major negative effect on the global economy, including inflation, economic uncertainty, the energy and food crisis, and the risk of a global recession.
3.2- Tension between China and the United States
Another narrative that continues to greatly affect the world is the tension that exists between China and the United States, which is having a significant effect on both countries and putting stock markets and the world economy in the spotlight.
These confrontations come from economic competition, geopolitical rivalry and ideological and value differences.
There have been several confrontations between both countries, such as the increase in tariffs between the United States and China, which has caused a decrease in trade, China’s closer positioning towards Russia in the war in Ukraine, the incident of the downing of the balloon Chinese spy in United States airspace, but above all what China is claiming is Taiwan as its own territory.
Therefore, the disputes between these two countries must be closely followed, since any movement that provokes a confrontation can endanger the economy worldwide.
At N&P we offer the possibility for you to anticipate these types of events and make your best decisions, giving you the possibility of obtaining narratives, which will inform you of the possible market trends and movements.
You can visit our website to find the best narratives.
