In this video, BlueBay Emerging Market Senior Sovereign Strategist Tim Ash considers the main impacts of geopolitics on markets in 2024, as well as the outlook for the geopolitical landscape in 2025. Key areas of focus include:
Foreign affairs implications of the incoming Trump administration
Likelihood of resolution of conflicts in the Middle East and Ukraine
Trade and tariff pressure on China and implication on the global market
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Transcription
For the past year, the main geopolitical pressure points have been the war in the Middle East in Gaza and the extension to Lebanon.
And managing through that and concerns about risk of escalation, uh, concerns that we could have a US or could have had a, a U.S.- Israel - Iran war, uh, extending to the Gulf impact on oil and commodity markets. And then the other one, which is again the continuation of the war in Ukraine and what that means, again, for global markets.
We didn't see escalation on either of those, uh, conflicts, although particularly I guess if you look at the situation in Gaza and Lebanon, pretty disastrous for populations that lived there. But we didn't see a broader war, which I think would've been devastating for global markets. So that was kind of the silver lining, although again, pretty awful for populations certainly in, in Gaza, Lebanon, and in Ukraine. The war continued unfortunately, and again, with, with significant casualties on both sides, but no broader, uh, escalation to bring in other players. Geopolitical risks for, for the year ahead are all related to the US election and the results of the US election. Obviously, Trump won those elections. In terms of foreign affairs, he's thrown a lot of the cards on the floor, and we're all struggling to try and pick them up and understand what it all means.
Um, I think in terms of the conflicts that shaped the world over the last year, again, the war inthe Middle East and then Ukraine on, on both those, Trump has suggested that he wants to, uh, bring those conflicts to an end.
Unclear how he's going to do that. Both are really difficult. I mean, obviously the one in the Middle East has gone on for decades, it didn’t just start on October 7th. And in Ukraine, again, a very entrenched conflict that has its origins before the full-scale invasion, perhaps going back a decade to the annexation of Crimea and unclear really what the Trump plan is. I mean, I think on both of those, and also with respect to the challenges in terms of the relationship with China, which is the primary, uh, risk, I guess, or concern for the US. It’s about maximum pressure, maximum pressure, I guess, on Russia to come to the negotiating table with Ukraine.
And then maximum pressure with Iran to reign in its proxies across the region. Obviously, Hezbollah, Houthies in Yemen and come to some kind of bigger agreement, I guess. But difficult, I think, especially given some of the U.S. allies in the region particularly Gulf states have had a different approach in recent years, which has been to reach out to Iran, and they're not particularly in favor of this very max pressure policy on Iran. And also, if you think of the war in Gaza, you know, if you look at the hires that Trump made, you know, they're really hardcore pro-Israel characters and it's unclear really whether some of the underlying issues that I guess drive the current problems in the region are really going to be addressed. The Palestinian issue seems it’s going to be swept under the carpet. What does that mean for regional stability? Again, what does it mean for the relationship between Gulf States and the US in particular? The Gulf States have been very focused on Palestinian rights in recent months. That's all very, very unclear. Trump's promising a lot, but I think delivery will be quite difficult.
And on China, the focus will be on again, max pressure, concerns obviously about tariffs and trade.
What does that mean for the global economy? Probably means lower growth, less trade, and more difficulties. I think generally for the, for the global economy.