Global economy’s looming geopolitical risks

GEOPOLITICS was not widely seen as a key trigger for last week’s market turmoil. However, multiple political fissures may yet erupt, bringing about greater economic disequilibrium in their wake.

Take the example of the Middle East, where the downside risks that the Gaza conflict could erupt into a full-scale war between Israel and Iran may be underpriced in markets. The immediate context is Iran’s pondering of its response to the recent killings of a top Hamas leader in Tehran and a senior Hezbollah commander in Beirut.

US National Security Council spokesman John Kirby said on Monday (Aug 12) that Iran could carry out retaliatory military measures on Israel as early as this week. He said “we have to be prepared for what could be a significant set of attacks” – a view shared by Israeli and other Western intelligence agencies, too.