Earth top view
BLACKROCK INVESTMENT INSTITUTE

Geopolitical risk dashboard

February 2025 | The world is facing dramatic geopolitical change. It has become more fragmented and unstable, in our view. It is more protectionist, entering a new era of trade disputes with the current global trading system under extreme pressure.
Download report Download report

BlackRock Geopolitical Risk Indicator

The global BlackRock Geopolitical Risk Indicator (BGRI) aims to capture overall market attention to geopolitical risks, as the line chart shows. The indicator is a simple average of our top-10 risks.

Risk summary Market movement Calendar Methodology
Free Form Html-1,Advance Static Table-1,Source-1
Paragraph-2,Free Form Html-2,Advance Static Table-2,Source-2
Paragraph-3,Paragraph-4
Paragraph-5

Top 10 risks by likelihood

The new U.S. administration has engendered a significant degree of macro and geopolitical uncertainty for markets. Just one month in office, U.S. President Donald Trump has issued a flurry of orders outlining the administration’s priorities – from immigration and the border to trade, energy and technology. And he has taken a number of steps that represent major changes in the direction of U.S. foreign policy.

Risk Description Likelihood Our view
Global trade protectionism Tariffs increase dramatically on goods entering the U.S., negatively impacting the macro outlook. High Since releasing our new Global trade protectionism risk in December, the Trump administration has announced a raft of tariff measures. This includes 10% tariffs on all imports from China; 25% tariffs on all aluminum and steel imports (effective March 12); and 25% tariffs on Mexico and Canada (delayed until March 4). The administration is also working to impose reciprocal tariffs on countries that apply tariffs and other policies that penalize U.S. exports. It has promised further action against regions like the EU, the BRICS countries and specific sectors such as oil and gas, semiconductors, pharmaceuticals and autos. These actions mark a sharp escalation in trade protectionism. We think the Trump administration will continue to use trade policy – particularly tariffs – to address a range of economic and national security issues. Countries are preparing retaliatory measures, which could exacerbate the impact, depending on implementation.
Middle East regional war Regional conflict escalates, threatening energy infrastructure and increasing volatility. High After more than a year of fighting, fragile ceasefire agreements are in place between Israel and Hamas in Gaza and with Hezbollah in Lebanon. Iran and its proxies and partners have been significantly diminished, with Iran weaker than it has been in decades. Recent proposals by the U.S. regarding the future of Gaza could strain relations between the U.S. and its Arab allies and threaten the ongoing implementation of the ceasefire agreements. The U.S. will likely continue to provide strong support to Israel and has ordered a “maximum pressure” approach on Iran. The U.S. has applied new sanctions on Iran’s oil network and will focus on Iran’s nuclear program, support for regional proxies and missile development – but not forestall entirely the possibility of a deal. Recent reporting suggests that an Israeli attack on Iran’s nuclear program could occur in the coming months, depending on U.S. support. In Syria, the fall of the Assad regime is one of the most significant events in the region in decades – and a significant blow to Iran’s regional position and to Russia’s role in the Middle East.
U.S.-China strategic competition Tensions escalate meaningfully over Taiwan or in the South China Sea. High U.S.-China military tensions are poised to escalate, in our view. Secretary of State Marco Rubio convened foreign ministers from Australia, India and Japan on his first day in office, signaling the U.S. focus on countering China in the Indo-Pacific. In the South China Sea, frictions between China and the Philippines pose a meaningful risk of miscalculation or accident. The Philippines and the U.S. recently conducted joint air patrol exercises for the first time under the new Trump administration. Meanwhile, China continues extensive and aggressive naval exercises near and around Taiwan and has pursued significant cyber actions against the U.S. The members of Trump’s national security team have affirmed the importance of maintaining the status quo over Taiwan. However, Trump has threatened to impose tariffs on Taiwan-made semiconductors and pressured Taiwan over its defense budget. The nuclear area could be the next risk frontier, as China aims to match the U.S. and Russia in terms of operational nuclear weapons by the end of the decade.
Global technology decoupling Technology decoupling between the U.S. and China significantly accelerates in scale and scope High AI is at the center of U.S.-China strategic competition. The U.S. strategy has been to protect and extend its AI lead, in part by denying China access to advanced tech and hardware. The release of a seemingly more efficient AI model by Chinese startup DeepSeek has raised questions about the effectiveness of this approach. The new administration has emphasized AI leadership as key for U.S. economic and national security. We expect a continued focus on export controls, data security and concentrating the AI buildout in the U.S. China will likely retaliate against U.S. measures, including through export controls on critical minerals and dual-use technology. We are watching for the Trump administration’s decision on the AI Diffusion Rule, a global framework set forth by the Biden administration to determine who gets advanced chips and under what terms. We see little prospect for U.S.-China cooperation on AI, and as a result expect the ongoing development of parallel, competing tech stacks.
Major cyber attack(s) Cyber attacks cause sustained disruption to critical physical and digital infrastructure. High Mounting geopolitical competition is causing cyber attacks to increase in scope, scale and sophistication. Around the world, hackers have used new AI technology to bolster their attacks, leveraging publicly available AI tools to assist with malicious code writing. A proliferation of new AI models has also raised concerns over their vulnerability to hacking and manipulation, prompting alarm in national security circles. State-backed hacking and espionage operations remain a significant risk. In recent years, such campaigns have targeted senior government officials and revealed major vulnerabilities in national telecom networks and critical infrastructure. In some instances, malware has been pre-positioned in infrastructure with the intention of causing disruption and destruction in the outbreak of future conflict. We are focused on the threat to cloud infrastructure and see cyber activity increasing in conflict zones and during election cycles globally.
Major terror attack(s) A terror attack leads to significant loss of life and commercial disruption. High The threat of terrorism against U.S. interests remains at an extraordinarily high level. Al-Qaida and the Islamic State have demonstrated persistent motivation to conduct and inspire attacks abroad in recent years, as seen in the recent Islamic State-inspired terrorist attack in New Orleans. A power vacuum in Syria following the fall of the Assad regime could further exacerbate the terror risk. We see other risks stemming from instability in the Sahel, the reconstitution of extremist groups in the Middle East and individuals motivated by events abroad to attack the U.S. We also worry about terrorists’ ability to leverage emerging technology such as drones and 3D printing for malicious purposes. Trump has moved to designate the Houthis and certain drug cartels as foreign terrorist organizations, and in February U.S. airstrikes targeting the Islamic State in Somalia marked his administration’s first major U.S. military action overseas.
Russia-NATO conflict The war in Ukraine becomes protracted, raising the risk of escalation beyond Ukraine. Medium Russia’s invasion of Ukraine is the largest, most dangerous military conflict in Europe since World War Two. Trump has promised to broker a quick resolution to the war, and U.S. and Russian delegations are holding direct talks for the first time since Russia’s full-scale invasion. This may lead to a meeting between Trump and Putin and a broader thawing of U.S.-Russia relations – but risks leaving the Ukrainians and Europeans in the background. While we could see some short-term de-escalation of the conflict, we think a long-term peace deal will be harder to reach. Russia will aim to put a broad set of security topics on the table, including sanctions relief, NATO activities, Ukrainian military capabilities and missile defense. In the lead-up, the U.S. has been trying to apply leverage with all parties – proposing to receive an interest in $500 billion of Ukrainian natural resources as payment for Ukraine aid, for example, and threatening Russia with tariffs, sanctions and other economic measures. Meanwhile, the conflict remains a bloody war of attrition with Russian troops still seizing Ukrainian territory.
Emerging markets political crisis Increased global fragmentation severely stresses EM political systems and institutions. Medium As the world faces a new era of potential trade confrontations (see our Global trade protectionism risk), emerging market economies are poised to experience different outcomes based on their underlying economic structures and trade relationships. Amid the trade disputes of Trump's first term, some countries faced headwinds but others, such as Vietnam and Mexico, benefited from trade diversification away from China. In a scenario of broad global tariffs, we’d expect export-dependent economies to face the greatest pressure, with currency realignment likely serving as the primary adjustment mechanism. Meanwhile, China’s continued export of industrial overcapacity will also cause divergence in emerging market economies – threatening domestic industries in some countries, while lowering the cost of beneficial products and inputs in others. Multi-aligned and "connector" countries will need to carefully navigate their trade relationships amid the global trade tensions.
North Korea conflict North Korea pushes ahead with its nuclear buildup and takes provocative actions such as missile launches. Medium North Korea has taken a series of escalatory actions that risk greater tension in and beyond the Asia Pacific region. These include renunciation of peaceful reunification with South Korea as a key policy goal and the deployment of munitions and troops to directly support Russia in its war against Ukraine. Meanwhile, North Korea’s nuclear program continues unabated. It has accelerated the deployment of nuclear-armed missiles that can destroy both regional targets and U.S. cities. Trump has said he would reach out to Kim Jong Un and may seek to again moderate North Korea through personal diplomacy. Compared with Trump’s first term, however, North Korea is emboldened by its stronger relationships with Russia and China as well as its own military advances. As a result, it may be less inclined to seek better relations with the U.S.
European fragmentation Subdued economic growth and persistent inflationary pressures amid fragile energy security lead to a populist resurgence. Low Europe remains largely united on key issues, although under increasing pressure. Challenges are evident in Mario Draghi’s 2024 competitiveness report and a new competitiveness roadmap unveiled by the European Commission in January. European leaders were shaken by Trump’s direct outreach to Putin, Secretary of Defense Pete Hegseth’s statements that Europe would no longer be a primary security priority of the U.S., Vice President J.D. Vance’s critique of European domestic politics and Ukraine peace negotiations proceeding without European involvement. We expect a challenging period for U.S.-Europe relations under a second Trump administration, with tensions likely to increase across trade, climate, defense spending, taxes, technology, China and other areas. How to respond to the Trump administration, particularly on Ukraine and defense, will put pressure on European unity – and on European governments, many of which became fragmented after a series of elections in 2024. Notably, we saw snap elections in France and an early breakup of the German governing coalition. France now faces a fragmented government, complicating fiscal reforms – and in December, held the first vote to oust a prime minister in more than half a century. We are watching for the outcome of German elections on Feb. 23 following the collapse of Chancellor Olaf Scholz’s coalition. 

Sources: BlackRock Investment Institute. Views and data as of February 2025. Notes: The “risks” column lists the 10 key geopolitical risks that we track. The “description” column defines each risk. “Attention score” reflects the BlackRock Geopolitical Risk Indicator (BGRI) for each risk. The BGRI measures the degree of the market’s attention to each risk, as reflected in brokerage reports and financial media. See the "how it works" section on p.7 for details. The table is sorted by the “Likelihood” column which represents our fundamental assessment, based on BlackRock’s subject matter experts, of the probability that each risk will be realized – either low, medium or high – in the near term. The “our view” column represents BlackRock’s most recent view on developments related to each risk. This is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any funds or security in particular. Individual portfolio managers for BlackRock may have opinions and/or make investment decisions that may, in certain respects, not be consistent with the information contained herein.

Comparing market movements and attention

We have developed a market movement score for each risk that measures the degree to which asset prices have moved similarly to our risk scenarios, integrating insights from our Risk & Quantitative Analysis (RQA) team and their Market-Driven Scenario (MDS) shocks. We do this by estimating how “similar” the current market environment is to our expectation of what it would look like in the event the particular MDS was realized, also taking into account the magnitude of market moves. The far right of the horizontal axis indicates that the similarity between asset movements and what our MDS assumed is greatest; the middle of the axis means asset prices have shown little relationship to the MDS, and the far left indicates markets have behaved in the opposite way that our MDS anticipated.

Risk map
BlackRock Geopolitical market attention, market movement and likelihood

Selected scenario variables

How to gauge the potential market impact of each of our top-10 risks? We have identified three key “scenario variables” for each – or assets that we believe would be most sensitive to a realization of that risk. The chart below shows the direction of our assumed price impact.

Risk Asset Direction of assumed price impact  
Global trade protectionism U.S. specialty retail & distribution Downwards arrow  
  U.S. consumer durables & apparel Downwards arrow
  U.S. two-year Treasury Downwards arrow
Middle East regional war Brent crude oil Upwards arrow  
  VIX Upwards arrow
  U.S. high yield credit Downwards arrow
U.S.-China strategic competition Taiwanese dollar Downwards arrow  
  Taiwanese equities Downwards arrow
  China high yield Downwards arrow
Global technology decoupling Chinese yuan Downwards arrow  
  U.S. investment grade Downwards arrow
  Asia ex-Japan electrical equipment Downwards arrow
Major cyber attack(s) U.S. high yield utilities Downwards arrow  
  U.S. dollar Upwards arrow
  U.S. utilities sector Downwards arrow
Major terror attack(s) Germany 10-year government bond Upwards arrow  
  Japanese yen Upwards arrow
  Europe airlines sector Downwards arrow
Russia-NATO conflict Russian equities Downwards arrow  
  Russian ruble Downwards arrow
  Brent crude oil Upwards arrow
Emerging markets political crisis Latin America consumer staples sector Upwards arrow  
Emerging vs. developed equities Downwards arrow
Brazil debt Downwards arrow
North Korea conflict Japanese yen Upwards arrow  
  Korean won Downwards arrow
  Korean equities Downwards arrow
European fragmentation EMEA hotels & leisure Downwards arrow  
  Italy 10-year government bond Downwards arrow
  Russian ruble Downwards arrow

Source: BlackRock Investment Institute, with data from BlackRock’s Aladdin Portfolio Risk Tools application, December 2024. Notes: The table depicts the three assets that we see as key variables for each of our top-10 geopolitical risks – as well as the direction of the assumed shocks for each in the event of the risk materializing. The up arrow indicates a rise in prices (corresponding to a decline in yields for bonds); the down arrow indicates a fall in prices. Our analysis is based on similar historical events and current market conditions such as volatility and cross-asset correlations. See the “implied stress testing framework” section of the 2018 paper Market-Driven Scenarios: An Approach for Plausible Scenario Construction for details. For illustrative purposes only. The scenarios are for illustrative purposes only and do not reflect all possible outcomes as geopolitical risks are ever-evolving. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any funds, strategy or security in particular.

We detail the key geopolitical events over the next year in the table below.

Date Location Event
January    
January 11 G7 Canadian G7 Presidency begins
January 3 U.S. 119th U.S. Congress begins
January 20 U.S. U.S. Presidential Inauguration
January 20-24 Switzerland World Economic Forum Annual Meeting
January 29 U.S. Federal Reserve Meeting
February    
February 3-5 Ethiopia African Union Summit
February 10-11 France AI Action Summit
February 14 Germany Munich Security Conference
February 13 Euro area European Central Bank Meeting
February 14 Japan Bank of Japan Meeting
February 20-21 South Africa G20 Foreign Ministers Meeting
February 23 Germany German federal election
February 26-27 South Africa G20 Finance Ministers and Central Bank Governors Meeting
February 27 U.S. Federal Reserve Meeting
March    
March 6  UK Bank of England Meeting
March 12 Canada Bank of Canada Meeting
March 18 Switzerland Swiss National Bank Meeting
March 20-21 EU European Council Meeting
March 26-28 China National People's Congress Annual Session
TBC Malaysia ASEAN Summit
April    
April 23-24  U.S. G20 Finance Ministers and Central Bank Governors Meeting
April 24 Japan Bank of Japan Meeting
April 25-27 U.S. IMF/World Bank Spring Meetings
May    
May 8  Euro area European Central Bank Meeting
May 12 Philippines Philippines congressional elections
May 15 U.S. Federal Reserve Meeting
May 16-18 Italy G7 Summit
June    
June 1  Mexico Mexican election of the judiciary
June 5 UK Bank of England Meeting
June 9-11 Belgium NATO Defense Miniters Meeting
June 12 Euro area  European Central Bank Meeting 
June 18 U.S. Federal Reserve Meeting
June 24-25 NATO NATO Summit
TBC Canada G7 Leaders' Summit

 

Source: BlackRock Investment Institute, December 2024.

How it works

The quantitative components of our geopolitical risk dashboard incorporate two different measures of risk: the first based on the market attention to risk events, the second on the market movement related to these events.

Market attention

The BlackRock Geopolitical Risk Indicator (BGRI) tracks the relative frequency of brokerage reports (via Refinitiv) and financial news stories (Dow Jones News) associated with specific geopolitical risks. We adjust for whether the sentiment in the text of articles is positive or negative, and then assign a score. This score reflects the level of market attention to each risk versus a 5-year history. We assign a heavier weight to brokerage reports than other media sources since we want to measure the market's attention to any particular risk, not the public’s.

Our updated methodology improves upon traditional “text mining” approaches that search articles for predetermined key words associated with each risk. Instead, we take a big data approach based on machine-learning. Huge advances in computing power now make it possible to use language models based on neural networks. These help us sift through vast data sets to estimate the relevance of every sentence in an article to the geopolitical risks we measure.

How does it work? First we “train” the language model with broad geopolitical content and articles representative of each individual risk we track. The pre-trained language model then focuses on two tasks when trawling though millions of brokerage reports and financial news stories:

  • classifying the relevance of each sentence to the individual geopolitical risk to generate an attention score,
  • classifying the sentiment of each sentence to produce a sentiment score

The attention and sentiment scores are aggregated to produce a composite geopolitical risk score. A zero score represents the average BGRI level over its history. A score of one means the BGRI level is one standard deviation above its historical average, implying above-average market attention to the risk. We weigh recent readings more heavily in calculating the average. The level of the BGRIs changes slowly over time even if market attention remains constant. This is to reflect the concept that a consistently high level of market attention eventually becomes “normal.”

Our language model helps provide more nuanced analysis of the relevance of a given article than traditional methods would allow. Example: Consider an analyst report with boilerplate language at the end listing a variety of different geopolitical risks. A simple keyword-based approach may suggest the article is more relevant than it really is; our new machine learning approach seeks to do a better job at adjusting for the context of the sentences – and determining their true relevance to the risk at hand.

Market movement

In the market movement measure, we use Market-Driven Scenarios (MDS) associated with each geopolitical risk event as a baseline for how market prices would respond to the realization of the risk event.

Our MDS framework forms the basis for our scenarios and estimates of their potential one-month impact on global assets. The first step is a precise definition of our scenarios – and well-defined catalysts (or escalation triggers) for their occurrence. We then use an econometric framework to translate the various scenario outcomes into plausible shocks to a global set of market indexes and risk factors.

The size of the shocks is calibrated by various techniques, including analysis of historical periods that resemble the risk scenario. Recent historical parallels are assigned greater weight. Some of the scenarios we envision do not have precedents – and many have only imperfect ones. This is why we integrate the views of BlackRock’s experts in geopolitical risk, portfolio management, and Risk and Quantitative Analysis into our framework. See the 2018 paper Market Driven Scenarios: An Approach for Plausible Scenario Construction for details. MDS are for illustrative purposes only and do not reflect all possible outcomes as geopolitical risks are ever-evolving.

We then compile a market movement index for each risk.* This is composed of two parts:

  • Similarity: This measures how “similar” the current market environment is to our expectation of what it would look like in the event the particular MDS was realized. We focus on trailing one-month returns of the relevant MDS assets.
  • Magnitude: this measures the magnitude of the trailing one-month returns of the relevant MDS assets.

These two measures are combined to create an index that works as follows:

  • A value of 1 would means that the market has reacted in an identical way as our MDS indicated. We call this “priced in.”
  • A value of zero would indicate that the pattern of asset prices bears no resemblance at all to what the MDS for a particular risk would indicate.
  • A value of -1 would indicate that assets are moving in the opposite direction to what the MDS would indicate. Markets are effectively betting against the risk.

*This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any funds, strategy or security in particular. The scenarios are for illustrative purposes only and do not reflect all possible outcomes as geopolitical risks are ever-evolving.

Stay ahead of markets with the latest insights from the BlackRock Investment Institute

Please try again
First Name *
Last Name *
Email *
Investor type *
Location *
Company *
*Required information | Read our Privacy policy
Thank you
Thank you for your subscription!
We usually publish weekly insights on every Monday. Expect to receive your first newsletter from us this upcoming Monday.