At the recent Sohn Hearts & Minds conference in Queenstown, New Zealand, Rabobank global strategist Michael Every delivered a stark warning regarding the pervasive influence of geopolitics on global markets. Rabobank is a Dutch multinational banking and financial services company, renowned for its strong focus on financing the food and agribusiness sector globally. Against the backdrop of a brutal artificial intelligence-driven sell-off on Wall Street, Every underscored that ignoring current geopolitical tensions could prove perilous for investors, especially given the interconnected nature of ongoing conflicts.
Every posited that the world is currently operating in an environment dominated by war, where control over global supply chains is paramount. He suggested that former US President Trump’s ambition to restore America’s top position could involve significant global restructuring. Following the Republican Party’s midterm election performance, Every anticipates a greater focus from Trump on foreign policy, potentially leading to talks of a peace deal between Russia and Ukraine. However, this glimmer of potential peace is offset by ongoing risks of escalation, exemplified by Poland’s recent revelation of thwarting a possible provocation from Russia’s Kaliningrad exclave. Any resolution or escalation in Ukraine would have direct market consequences, impacting global oil prices and subsequently diesel and petrol costs.
Similarly, the situation in the Middle East, particularly concerning Iran, presents a complex mix of peace overtures and heightened tensions, including speculation of fresh attacks amid Prime Minister Benjamin Netanyahu’s diminishing prospects for forming a new Israeli government. Every characterised the broader Middle Eastern conflict as a ‘war against the global economy.’ He cautioned that the greater risk lies in these two major fronts, Ukraine and the Middle East, conflating into an even larger global conflict, potentially drawing in more nations and inflaming existing hotspots across Asia. For investors, this ‘Tolstoy conundrum’ means peace would significantly move markets downwards (especially oil), while escalation would present even larger problems.
