Wars, energy shocks, U.S. debt and systemic financial risks: why investors fear a new global crisis.
Geopolitics and markets: risk of a global recession
Wars, energy shocks, U.S. debt and systemic financial risks: why investors fear a new global crisis.
Geopolitics returns to drive global markets
In recent months, geopolitics has once again become the main driver of global financial markets. The war in Ukraine, escalating tensions in the Middle East, growing rivalry between the United States and China, and the increasing fragmentation of the global economy are fueling fears of a global recession, energy shocks, and financial instability.
The main flashpoint today is the Middle East. The attack on Iran and the risk of escalation in the Persian Gulf have revived concerns about the Strait of Hormuz, through which roughly one-fifth of the world’s oil supply passes.
For energy markets, this means extreme volatility and the potential return of a global energy crisis, with oil and gas once again at the center of inflation dynamics.
The effects are already visible: oil prices are rising again, while investors are repricing the so-called “geopolitical risk premium,” the risk premium associated with international conflicts.
Energy and inflation: the return of the oil shock
A direct conflict with Iran could generate an energy shock similar to—or even greater than—the one triggered by the war in Ukraine.
A prolonged period of tension in the Persian Gulf would likely produce three immediate consequences:
For central banks this represents a crucial challenge. After years of restrictive monetary policy aimed at fighting inflation, a new energy shock could delay the interest-rate cuts expected by markets.
The result would be a dangerous combination: weak growth and persistent inflation, the classic scenario of stagflation.
Private equity and tech credit: the new systemic risk
Another element worrying analysts concerns the structure of the global financial system.
Over the past decade, private equity, venture capital, and large investment funds have heavily financed the technology sector, particularly the AI, cloud computing, and digital startup ecosystem.
The issue is that a significant portion of these investments has been supported by highly leveraged debt, often tied to business models that are not yet profitable.
Many economists are beginning to see parallels with the 2008 subprime mortgage crisis:
If global growth were to slow sharply, part of this financing could turn into non-performing loans, putting pressure on banks, funds, and financial markets.
The problem of the “U.S. Debt Overhang”
Another major source of instability is the growing U.S. Debt Overhang, referring to the massive accumulation of U.S. public debt.
Federal debt has reached historically high levels and continues to grow rapidly. The key issue is not only the absolute level of debt, but also the rising cost of financing it in a context of higher interest rates and persistent inflation.
Because U.S. Treasuries serve as the benchmark asset for the entire global financial system, any loss of confidence in U.S. fiscal sustainability could trigger a global systemic shock.
What major investors are saying
Several of the world’s most influential investors are signaling caution.
Howard Marks, co-founder of Oaktree Capital, has emphasized that the world has entered a new financial era characterized by structurally higher interest rates, greater volatility, and reduced global liquidity.
Ray Dalio, founder of Bridgewater Associates, believes the world is experiencing a major debt cycle, in which high public debt, geopolitical tensions, and rivalry among global powers could reshape the international economic order.
Among individual investors:
Macroeconomic outlook
Leading economic and financial institutions broadly agree on one point: global growth in the coming years will likely be weaker than in the previous decade.
Many economists believe that the combination of geopolitical tensions, elevated debt levels, and a highly leveraged financial system makes the global economy more fragile than in the past.
How investors should position themselves today
Faced with such a complex scenario, the key question for investors is: how should a portfolio be protected?
Insights from leading global strategists—including Ray Dalio, Howard Marks, Mohamed El-Erian, and Jeremy Grantham—converge on several core principles.
1. True portfolio diversification
In a highly volatile environment, it is essential to avoid excessive concentration, particularly in sectors that appear overvalued.
Diversification should include:
2. Greater exposure to real assets
During periods of inflation and geopolitical tension, many analysts recommend increased exposure to:
Historically, these assets tend to perform better during inflationary shocks and geopolitical instability.
3. Strategic liquidity
Warren Buffett’s approach provides another important lesson: maintaining a meaningful cash position allows investors to seize opportunities that emerge during market corrections.
In times of high uncertainty, liquidity becomes a strategic option.
4. Periodic portfolio rebalancing
Many strategists recommend adopting a portfolio rebalancing strategy, periodically adjusting asset allocation to maintain the desired level of risk.
This approach helps reduce exposure to assets that have risen excessively and increase exposure to those that have become undervalued.
An increasingly fragile global balance
The global economic system is undergoing a profound transformation.
If the 2008 crisis originated in the subprime mortgage market, today the next shock could emerge from a combination of factors:
For this reason, many investors are adopting a more cautious stance.
Not necessarily because a crisis is inevitable, but because—as Howard Marks and Ray Dalio often remind us—economic cycles never disappear; they simply change form.
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