IA “FAKT”, with reference to the report on global financial stability of the International Monetary Fund, wrote that geopolitical tensions, including international trade conflicts, threaten global financial stability. Wars, rising defense spending and new restrictions are increasing risks like never before. The Russian invasion of Ukraine dealt the strongest blow to the markets: shares were falling by 5% every month. The markets of developing countries are particularly vulnerable. At the same time, credit risk premiums are rising and Wall Street is experiencing the most volatility since the pandemic.
The global economy is under fire: stock indexes fall
The International Monetary Fund declares: geopolitical conflicts have turned into an instrument of financial destruction. The world economy has become a battlefield. And the events of recent weeks are not economic fluctuations, but systemic turbulence.
US President Donald Trump is using methods of economic blitzkrieg. Recently he is without warning introduced 10% general duty on imports into the US and increased tariffs on Chinese goods up to 145%. This is not an economic reform, but an open economic war against China and at the same time a blow to the USA. Beijing responded with 34% tariffs on American goods. The reaction of the markets is panic. The MSCI index instantly collapsed, burning more than 5 trillion dollars of market capitalization.
There is nothing more toxic to a global investor than a war with an uncertain end. And Russia’s war against Ukraine, which has been going on for the fourth year, remains a systemic factor of economic pressure on Europe. The IMF points out: military conflicts of this scale hit markets twice as hard as any other geopolitical event. Minus 5% profitability every month is not just a statistic, but a sentence for an investor.
Constantly exists the threat of military confrontation between Iran and Israel. Each missile attack in the region provokes an instant jump in oil prices, followed by a rise in energy prices around the world, a blow to price stability, and thus to the wallet of every European.
The build-up of China’s presence in the Taiwan Strait and announcements of military exercises around the island is a game on the edge. World corporations are in a panic, counting how many billions they will lose if Taiwan becomes the next Ukraine. After all, 60% of the world’s chip production is concentrated on a single island.
Stock fronts: how geopolitics is blowing up financial markets
The world is no longer divided into “financial” and “military” dimensions. In the era of new wars – both missile and trade – any market becomes a target. Geopolitical instability doesn’t just adjust quotes — it tears markets apart.
The IMF believes: geopolitics knocks out up to 1% of stock market capitalization every month, and up to 2.5% in emerging markets. Here is an example. On April 11, after Trump announced new tariffs on Chinese goods (rates up to 145%), the MSCI index lost over $5 trillion in market capitalization. This is not a correction, but a collapse.
Where capital flows, the cost of debt soars. This year in April the yield of 10-year US bonds jumped up by 45 basis points — the most since 2001. This signals that even US Treasury securities are no longer a “quiet haven”. Each escalation puts additional pressure on public debt, especially for weaker economies.
The Middle East is boiling: Iran, Israel, the Houthis in Yemen. One hit on an oil tanker — and oil already jumps by +6-7%. According to Bloomberg, in the event of a war in the Strait of Hormuz, the price of Brent will reach $130+ per barrel. And then a chain reaction will be launched: inflation, shortages, food panic.
During every crisis, Bitcoin tries to become “digital gold”. He often succeeds. But in April of this year, it too shuddered: after the Pentagon’s statement about a possible Chinese cyberattack against US infrastructure, BTC lost 9.4% overnight. A world without stability is not for volatile assets.
Why are they the first victims? Because capital was fleeing to the USA even before the collapse. Runs away even faster after the news. Because currency reserves are weak and inflation is high. In addition, the debt is in dollars, and when the latter becomes more expensive, default is not far away. As an example: Turkey’s currency lost 8% in a week after the announcement of the possible deployment of NATO in Syria.
How the big players of the financial market are strengthening the rear in the new geopolitical war
Geopolitics is no longer background music for stock markets. This is a full-scale combat operation that destroys trillions of dollars in capitalization. And those who own capital are taking defensive actions: reviewing portfolios, reducing exposures, building defensive redoubts of credit swaps.
Institutional players are retreating under cover to conserve resources. According to Reuters, one of the biggest players — Janus Henderson — is official urged clients to reduce the share of shares in their portfolios: “The threat of recession and geopolitical tensions require a reassessment of risks.”
When the financial future of tens of millions of people is at stake, you have to act aggressively. CalPERS (California Pension Fund) and Ohio PERS are active are reviewing strategies and increase investments in hedge funds. A hedge is like a bulletproof vest for long-term investments.
Credit Default Swaps is not just a tool, but a real systemic weapon. It is on them pass professional players, particularly Lombard Odier clients, who build portfolios based on CDS indices to hedge and earn even under fire. The analytical report states that “CDSs provide higher returns and liquidity compared to high-risk bonds.”
The USA is no longer perceived as an island of stability. The Wall Street Journal reports: a number of pension funds are refocusing on stocks in Europe and Asia. The focus is on countries less dependent on trade wars.
The banking system of Ukraine: stability on the edge, or how to survive in war conditions
This year, the Ukrainian financial system is on the defensive. In the conditions of a full-scale war and a post-Covid economy, the banking sector did not collapse. Even more, he preserved capitalization, passed stress and gained the trust of the population. But don’t be fooled: stability does not mean the absence of problems. This is the ability to survive under pressure that would have crushed the financial systems of many neighboring countries long ago.
With the beginning of Russian aggression, the economy received a blow that could become fatal. But the banks are holding on. The volume of citizens’ funds in the accounts of the largest banks did not fall. Vice versa, increased. This is a direct indicator of trust, and not in the authorities, but in institutions that have endured. Banks with capital, which even before the war was “with a margin”, managed not only to save themselves, but also to restrain panic among customers.
National Bank of Ukraine does not fall in illusion In 2025, the NBU resumed full stress testing of banks. 21 financial institutions, which collectively own more than 90% of the banking system’s assets, will undergo an asset quality review. Independent auditors will check. The National Bank does not just check, it prepares the system for new realities. Liquidity requirements have grown. And the minimum authorized capital will increase to 500 million hryvnias after the war. Under such demands, the stronger will survive, while the weaker will either get angry or leave the market.
The world is falling apart: the economy is in the phase of friendshoring and a cold financial gap
Globalization, which has been built since the 90s, is being disassembled today, like a tank for repair after direct hits. A constructive alternative became friendshoring — transfer of production to allied countries. This strategy is not just logistics, but a new geopolitical weapon.
After the shock of COVID-19 and Russia’s invasion of Ukraine in 2022, the United States began a massive shift in production. China, until recently the “factory of the planet”, is losing ground. It is being replaced by Vietnam, Mexico, and the Philippines. Resources are directed to where there will be no sanctions. Contracts are concluded only with politically reliable ones. The world lived according to one model: manufacturing where it is cheaper. Today, manufacturing is done where it is safer. It costs more, but it’s survival.
Investors withdraw capital. Companies are disrupting supply chains. And this is no longer a trend, but a new world order. Corporations shorten dependence on Chinese components, especially in critical areas: chips, microelectronics and medical equipment.
If wars continue and sanctions multiply, reserve currencies are in doubt. The dollar is losing its monopoly: the European Union promotes the euro as a regional center of influence, China – the yuan, India – the rupee. Experts warn: the dollar world may be a thing of the past.
Global capital no longer seeks profitability — it seeks political stability. The IMF warns: the division of the world into economic blocs will reduce global GDP by 2-7%. Countries that cannot “fit” into any camp will suffer the most.
…Next time, we will look at how rising geopolitical tensions affect the cost of borrowing by countries. The events of April 11 became a marker: after Trump announced new tariffs on Chinese goods with rates of up to 145%, global markets experienced a collapse. The MSCI All-Country World Index lost more than $5 trillion in market capitalization, the biggest drop since the pandemic.
This is not just a market correction, but a signal of a deeper transformation: investors are losing confidence in the stability of the global system. JPMorgan analysts warned about the risk of recession, and BlackRock CEO Larry Fink stated, that tariffs have gone beyond the imagination, worsening the investment climate.
Against this background, the questions become especially relevant: which countries are most vulnerable to the increase in the cost of borrowing? How is the assessment of business risk changing, even in peaceful regions? Is the geography of investment and production changing? Are transnational corporations adapting to the new reality? And who will be the winner and who will lose in the new geoeconomy?
Tetyana Viktorova
