As economies become increasingly global and interconnected, geopolitical tensions have the potential to impact companies not only within the country or region affected by an event, but also across the world. Whether it’s the result of territorial disputes, ideological differences or regional power struggles, geopolitical risk can influence the stability and development trajectory of global nations.
Geopolitical tensions can trigger economic risks, such as legal and regulatory issues, supply chain disruptions or price volatility in commodities. They can also cause business instability and lead to uncertainty about the future of international partnerships or supply chains, and disrupt long-term investment strategies. In fact, a recent survey found that CEOs believe intensified trade wars are the biggest geopolitical risk to business operations in 2025.
The causes of geopolitical tensions vary by country or region, ranging from resource scarcity to historical rivalries. For example, the ongoing conflict in the Middle East is a result of long-standing geopolitical rivalries that have evolved over time. The resulting tensions can have significant impacts on global energy prices, international security, and supply chains.
Geopolitical tensions can also be exacerbated by natural events, such as climate change or rising sea levels. These impacts can contribute to competition for dwindling resources, migratory pressures and disagreements about how to mitigate climate change. Finally, the race for technological supremacy has created new fronts of competition and potential tension. This includes the pursuit of sustainable energy, critical minerals and green technology as a means of increasing national competitiveness.