Investors Need To Rethink "Geopolitical Reactivity"
Current strategies will lead to investor exhaustion
More than two months into the US-Iran war, and markets are bouncing up and down. At every turn, the value of options such as oil or fertilizer rises or falls as diplomatic hopes peak or plateau. When President Trump says a “deal is close,” oil drops under $100. When Iran launches strikes on the UAE and Kuwait, oil rises more than 2%.
From the investor lens, there is nothing “strange” here. Investment has always been driven by sentiment and emotion. Reactivity is the norm. But investors are now operating in a new geopolitical landscape. The West is broken, wars are spreading, trade is fractured, and sovereignty overshadows everything.
In such an environment, reactivity is dangerous.
(*Geopolitical Reactivity is a concept/expression of Abishur Prakash/The Geopolitical Business, Inc)
Because, how long can investors play ping-pong with geopolitics, chasing headlines, constantly picking risk over reward or vice-versa? In the old world, when stability, structure, and rules prevailed, flare-ups were either short-lived (i.e., US-North Korea on the brink of war in 2018) or isolated (i.e., there was an eight-year gap between Russia’s annexation of Crimea in 2014 and its invasion of Ukraine in 2022). But today, geopolitical flare-ups are not temporary or rare; they are frequent and multiplying. How long can investors keep running from sell to buy, or buy to sell, when the fires never stop raging - when the timeline of a geopolitical event is limitless?
Instead, investors must redefine their “geopolitical reactivity”: how they respond to a global crisis.
This means, instead of strategies being governed purely by the immediate shocks (i.e., Strait of Hormuz paralysis creating a global energy crisis), they are also governed by long-term geopolitical strategy. This requires investors to understand the “A-to-Z” of a flashpoint, and where it could land, what I often refer to as “gaming out geopolitics.”
Armed with clarity and direction, investors will be interpreting geopolitics through a new lens. Most important, they will not be steering portfolios with the subtle expectation that normality returns, a sentiment clearly seen in the ongoing US-China rivalry, which is completely unseen in markets as investors remain satisfied with the Washington-Beijing “tariff pause” but are not seeing other warning signals, like that China has been supplying AI to Iran to strike American forces or that America has not shipped a single advanced AI chip to China in recent months.
Put simply, there is a deep and growing disconnect between markets and geopolitics. Eventually, this will be corrected. Those with traditional geopolitical reactivity will be disrupted. Those with new reactivity will absorb the pressure.
At the center of all this is a central paradigm, one that I have been driving home in boardrooms for at least half a decade now. Businesses must start putting politics ahead of profits. They must think from a “Geopolitics first” position.
The ongoing war with Iran should be treated as a wake-up call for the global investment community. Jumping up or ducking low cannot be the strategy to weather geopolitics. In fact, it is no strategy at all. To navigate a fractured world, investors must treat geopolitics as a constant - and view reactivity as the quickest way to bleed.
-Abishur Prakash aka “Mr. Geopolitics”
Mr. Geopolitics is the property of Abishur Prakash/The Geopolitical Business, Inc., and is protected under Canadian Copyright Law. This includes, but is not limited to: ideas, perspectives, expressions, concepts, etc. Any use of the insights, including sharing or interpretation, partly or wholly, requires explicit written permission.