Biggest geopolitical risks for investors in 2026

By George Devo

Last year saw geopolitical tensions continuing to rise across the world. The Russia-Ukraine War rumbled on, US-China tensions heightened and the US became a hotbed of protectionism.

Heading into 2026 these trends show little sign of stabilising.

With greater uncertainty comes greater risk for investors. Here are five risks, in particular, which investors should have at the forefront of their radar the coming year.

Trump’s Fed up

Federal Reserve chair Powell and president Trump haven’t had an easy working relationship, with the former voicing his displeasure over the latter’s more restrictive views on monetary policy.

Powell’s term is up in May 2026 and his replacement, chosen by Trump, is likely to support lower rates.

However, the new chair faces a mixed, macroeconomic picture partly, in the opinion of some economists, due to Trump’s policies on trade and immigration.

Atakan Bakiskan, US economist at Berenberg, argues that “sky-high tariffs, no net immigration and institutional decay” could “spell the end of [recent] strong growth with moderate inflation” for the US.

Richard Barwell, head of macroresearch and investment strategy at BNP Paribas AM, says “there is genuine uncertainty about how the Fed will navigate” this backdrop “under a new leadership”.

The market’s hope is that a credible, dovish figure is chosen to lead the Fed. It values the independence of America’s central bank and any perceived political control over it could cause serious volatility.

The risk, outlined by Aberdeen’s global macro research team, is that the new boss isn’t credible:

“This could be the trigger for a bond market rout scenario in which both inflation expectations and term premia – the extra yield for longer-term bond risk – move higher.”

What’s a sovereign territory between friends?

President Trump seems unlikely to abandon his mission to bring Greenland under US control.

“Trump’s success in extracting concessions from Europe [on defence spending] last year may encourage him to press for another favorable deal,” observes Vladimir Gorshkov, macro policy strategist, and Elliot Hentov, head of macro policy research, at State Street Investment Management.

The imposition of tariffs on major European allies or any military invasion of the island would likely send markets haywire, perhaps that’s why Trump used last week’s Davos speech to rule out both options.

Despite this, the short-term impact of this North Atlantic quarrel, coupled with the wider rise of transatlantic tensions, seems to be investors turning away from US bonds.

Emma Moriarty, portfolio manager at CG Asset Management, notes how Trump’s rhetoric has “further heightened the negative risk sentiment towards US assets and given greater cause for rotation away from these”.

She continued: “Although Scott Bessent has said that a decision by European governments to sell US Treasuries would ‘defy logic’, it will likely continue to be the case that these developments serve as a prompt to diversify away from US assets, particularly those with long duration.”

Moriarty mentioned Danish pension fund AkademikerPension’s recent move to divest its holding of US Treasuries, worth over $100m, as evidence of this.

JP Morgan’s Erik Wytenus, head of EMEA investment strategy, and Madison Faller, global investment strategist, add: “If uncertainty stalls business and household decisions, we could see downside pressure on euro area growth”.

However, the pair offer the brighter news that European equities’ “exposure to this seems limited”, with some analysts estimating that only 2% of MSCI Europe’s revenue is directly at risk from Greenland-related uncertainty, “given exemptions and the ability of sectors like defence to pass on costs”.

They recommend investors build “durable and resilient” portfolios to guard against drastic fluctuations in the market.

The Russia – Ukraine War

It has been nearly four years since Russia launched their full scale invasion of Ukraine, sending inflation sky-high, disrupting supply chains and causing a sea change in European defence policy.

2026 could be a definitive year for the conflict in the East, with the US driving efforts for a lasting peace deal.

Berenberg’s Bakiskan presents two visions of the future. The optimist’s case, where Putin is pressured into “an armistice acceptable to Ukraine and backed up by credible long-term US and European security guarantees to deter any further Russian aggression”.

European markets would be a “major beneficiary” of this. However, the alternative is a Putin victory. This would “send shockwaves throughout Europe, spark a blame game, trigger a flow of refugees and embolden Europe’s pro-Russian populists”.

In other words, uncertainty doesn’t cover it.

In the meantime, investors need to watch developments carefully and, according to BNP Paribas’ dedicated equities team: “Be prepared for volatility due to contradictory news about a ceasefire”.

The truth is the future of this conflict is, as a former US defence secretary would’ve said, a known unknown. We know major developments are likely to happen this year but nobody’s confident about what the outcome will be, with all scenarios promising significant disruption to the markets.

Pipe dreams

If Trump gets his way, the oil market could be flooded with cheap, new oil from Venezuela.

This may tempt some to bet on oil, predicting a stunning year for US industry titans. Shares in US oil giants, such as Chevron and Exxon, jumped in the wake of Nicolas Maduro’s capture by US forces.

However, 2026 begins with global oil supply relatively high, meaning prices are moderate. Building Venezuelan oil production back up again to significant levels would be (very) costly and take a (very) long time.

Simonetta Spavierri, Schroder’s climate engagement lead, acknowledges that “limited production increases” may be possible, but “the more insurmountable constraints are above-ground: political instability, legal uncertainty, degraded infrastructure and unresolved arbitration claims”.

She argues the necessary investment to realise this will be hard to attract in a climate where “investors are demanding sustained capital discipline” from asset managers.

Similar to risk-averse investors “slashing” stakes in unproven “low-carbon investments” across 2025, Spavierri explains they won’t be rushing to invest in “upstream exploration and development, particularly in high-risk jurisdictions” like Venezuela, offering high, immediate costs and uncertain returns years down the line.

Even without a South American oil boom, Christopher Jeffery, co-head of asset allocation and head of macro at Legal and General, argues it’s the danger of an oversupply which should concern investors in 2026.

He said prices have “been on a downward trajectory since mid-2022” and this trend could potentially “challenge the tight valuations of US oil majors”.

“Oil is heading into 2026 under growing pressure,” acknowledges Farah Mourad, market analyst at IG.

Some would point to the potential for unrest in the Middle East, including protests and government suppression in Iran, as a potential risk for supply.

However, these fears have eased in the markets, as US rhetoric has cooled on the Iranian regime.

Holger Schmieding, chief economist at Berenberg, expects “the global economic and financial impact of the conflicts in the Middle East to remain small”.

He continued, “key troublemakers such as Iran have been weakened. Even the joint Israeli/US attack on Iran last June did not disrupt the flow of oil and gas from the Gulf to global markets at the time.”

The Taiwan problem

Whether China will ever outgrow the US economy to become the world’s largest is a topic of debate amongst economists.

However, there’s no question that the two superpowers are currently battling for geopolitical influence and will likely continue to do so throughout 2026.

Chris Iggo, CIO for BNP Paribas, says this is “no more evident than in technology”, with commodity prices rising as control over the supply chains for rare earths and minerals becomes ever more “central to global economic dominance”.

Taiwan produces over 60% of the world’s semiconductors, and more than 90% of the advanced model, the components crucial to keeping much of the digitised world ticking.

Therefore, a Chinese invasion of Taiwan would be, in Berenberg’s words, “the nightmare scenario” for markets.

Alternatively, China could decide “to test the stamina of the west by blocking all trade routes to Taiwan” causing “havoc in global commerce and politics”.

Gold rush

Investors have long seen gold as a safe bet during times of global instability.

Michaël Lok, group CIO and co-group CEO of asset management at UBP, notes the “exceptional rally” the precious metal enjoyed across 2025 and remains “positive about its upward trend and its core role in portfolio diversification” in 2026.

However, some believe an overreliance on the precious metal could cost investors.

Investment management platform SimCorp argues gold isn’t “an automatic hedge” and, while it can perform during crises, its “protective value can diminish when real yields rise or the US dollar strengthens”.

Its benefits can “fade or even reverse when inflation, interest rates, and currencies move in tandem”.

It acknowledges gold can serve a useful role as part of a “strategic asset allocation”, but shouldn’t be relied upon too heavily in a portfolio.

George Cotton, a commodities portfolio manager at J. Safra Sarasin, believes how gold fares in 2026 will be largely determined by the US administration’s next steps.

He said: “A reassertion of the Republican establishment is likely to drive de-escalation vis-à-vis tariffs, international relations, stabilisation in the dollar, and pressuring gold.

“However, the Balkanisation of Trump’s inner circle means populist operators are emboldened to stay the course and further entrench the America first doctrine, keeping positive drivers for gold firmly in place.”

Biggest geopolitical risks for investors in 2026

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