Geopolitics vs. markets: How might the US, China and Iran reshape global risk?

Geopolitical fragmentation and the persistence of cognitive dissonance in financial markets define the current global landscape, characterized by robust risk-on sentiment despite escalating international tensions. The conflict in the Middle East, particularly Iran’s efforts to control the Strait of Hormuz, threatens global energy supplies and risks triggering broader military escalation. Simultaneously, the U.S.-China relationship remains a critical focal point, with both nations seeking to manage strategic competition through frameworks like "constructive strategic stability" to avoid outright conflict. AI development has evolved into a central pillar of this rivalry, shifting from a race for model supremacy to a broader competition for industrial ecosystems, energy infrastructure, and national advantage. As these dynamics unfold, the ability of global powers to maintain predictable, bounded competition remains the primary indicator for long-term economic and market stability.