We will remain in an environment of heightened geopolitical risk in 2026. This is a result of various megatrends still playing out, including: the transition to multipolarity, economic warfare, US–China competition, as well as the arms and technology race underway. The war in Ukraine and tensions in the Middle East are additional factors. As geopolitical risk remains elevated, so is the likelihood of downside surprises and tensions flaring up. However, geopolitics also defines trends that bring opportunities. While uncertainty will prevail, geopolitics in 2026 will bring both upsides and downsides for investors.
From ‘Great Diversification’ to ‘Controlled Disorder’
Over the past year, diversification efforts by governments, central banks and investors saw the USD weaken, gold prices rally, and new trade and security deals emerge. As governments aim to bring order into a factious world, more tactical bilateral and multilateral agreements are likely, ensuring trade and investment flows continue.
The ‘Controlled Disorder’ emerging is a by-product of the new multipolar world order. Alternative alliances allow an escape route from economic friction by re-routing, but they also add risk because countries can be confrontational. Multiple alliance-building increases distrust, encouraging countries to hedge their bets and re-arm.
More protectionism, export controls and sanctions are likely as countries protect their interests and exert pressure on rivals. The US will continue to use tariffs as a tool for various goals, while China will leverage control over rare earths and other chokepoints. Other countries are introducing measures to protect industries (e.g., recent EU steel tariffs).
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