Global Risks and Geopolitical Tensions in 2025
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The world is facing a growing list of global risks, including rising tariffs, escalating geopolitical tensions, widening budget deficits, and volatile financial markets. The United States is now trying to manage two simultaneous fronts:
China, its main economic competitor, and
Russia, the center of ongoing geopolitical conflict.
A recent global survey from 2025 shows how countries perceive their greatest threats.
For the United States, China is considered the top threat.
For most European nations, it’s Russia.
Interestingly, Canada and Mexico view the United States itself as their biggest concern. In the Asia–Pacific region, Australia and Japan also see China as their primary threat, while South Korea names North Korea.
For India, the main rival remains Pakistan; Turkey sees Israel as a threat, and Israel, in turn, regards Iran as its major adversary.
This shifting map of perceived threats reflects a world where alliances are fragile and national interests are increasingly defined by competition and caution.
Europe’s Strategic Shift: Energy, Security, and Economic Strain
The European Union is working on new financial and security strategies toward Russia, focusing on three main fronts:
Energy – accelerating the phase-out of Russian gas and oil.
Finance – exploring the use of frozen Russian assets.
Defense and Security – expanding the Eastern Flank and developing a “drone wall” for protection.
However, these policies come at a high economic cost.
Defense budgets are rising, energy costs remain high, and inflation has not yet fully subsided. As a result, budget deficits and bond yield increases have become growing concerns across Europe.
Germany, for example, has become a net importer of electricity after shutting down its nuclear power plants. Electricity prices there have surged to €500 per megawatt-hour. Despite being one of the world’s leading producers of renewable energy, Germany faces energy shortages due to its heavy industrial consumption, reduced gas imports from Russia, the closure of nuclear plants, and the sharp decline in coal use.
Meanwhile, Europe is preparing for potential conflict, rebuilding its military capabilities on a historic scale. Since the start of the war in Ukraine, the EU’s defense factories have expanded three times faster than during peacetime, now covering more than 7 million square meters of new industrial space dedicated to ammunition and missile production.
This military buildup has fueled a remarkable rise in European defense stocks, marking one of the most significant shifts in the region’s postwar economic landscape.
NATO’s Military Spending Surge After the Ukraine War
Russia’s invasion of Ukraine on February 24, 2022, triggered a wave of major global changes, one of the most significant being the sharp rise in military spending among NATO members. Since 2020, NATO countries have collectively increased their annual defense budgets by about $390 billion. Yet this growth has not been uniform across the alliance. For instance, Italy has raised its defense budget by only 15%, while Poland has boosted military spending by an astonishing 180%.
This surge in defense investment is reshaping the region’s military balance. Higher budgets often translate into enhanced defense capabilities, strengthening NATO’s ability to counter Russia, a country now seen as its most immediate and dangerous adversary.
At the same time, investor sentiment has shifted. Interest in defense and weapons manufacturing stocks, including those tied to nuclear arms production, has soared. Since the beginning of the war, the number of European ESG funds (environmental, social, and governance–focused investors) that now hold shares in nuclear weapons–related companies has risen by 50%. Nearly half of all European ESG funds are now indirectly investing in this once-restricted industry a striking sign of how security concerns are reshaping financial ethics.
The central obstacle in the ongoing Russia–Ukraine peace negotiations remains the issue of occupied territories.
Vladimir Putin, the President of Russia and the initiator of the war, is determined to retain control over these areas — a demand that continues to block meaningful progress in the talks.
Putin’s key conditions for any peace agreement include:
Permanent control over the Donbas region
Freezing the frontlines in Zaporizhzhia and Kherson; effectively keeping the current territorial status quo
Blocking Ukraine’s membership in NATO
Prohibiting the presence of Western troops on Ukrainian soil
From Moscow’s perspective, these demands are rooted in security concerns. The expansion of NATO since World War II moving steadily eastward, is seen by Russia as a direct threat to its sphere of influence and national security. This clash between Russia’s desire for strategic buffer zones and Ukraine’s push for sovereignty and Western integration continues to define the deadlock at the heart of the war.
Diverging Demands and the Illusion of Mediation
Russia’s proposed conditions stand far apart from the goals of Ukraine and the European Union, making a breakthrough in peace negotiations increasingly unlikely. While Moscow draws a sharp line between Ukraine’s potential EU membership (which it can tolerate) and NATO membership (a red line), this distinction once again underscores the Kremlin’s core fear the expansion of Western military influence near its borders. Meanwhile, Ukraine’s resources and morale are under strain. Military readiness has reportedly dropped to around 47–48%, signaling a critical shortage of personnel and equipment as the war drags on.
Amid this stalemate, Donald Trump is trying to portray himself as a potential mediator. However, his contradictory statements, alternating between threats and conciliatory gestures, have left Washington’s stance unclear. Trump’s approach suggests his main priority is to cut U.S. costs and shift the defense burden back to NATO.
Adding to the intrigue, reports have surfaced about a proposed “Putin–Trump Tunnel” a symbolic idea floated by a Russian envoy. The plan envisions a 112-kilometer rail tunnel beneath the Bering Strait, linking Russia and Alaska. It would serve as both a trade corridor and a “symbol of unity” between the two nations, with a suggested construction timeline of under eight years. Interestingly, the Russian side even proposed that the project be built by a company owned by Elon Musk. While such a project remains highly speculative, its mention highlights the surreal blend of diplomacy, symbolism, and power politics shaping the global stage today.
Global Arms Trade: Rising Demand and Shifting Leaders
The United States remains the largest arms exporter in the world, while France and South Korea are competing for the second position. In particular, South Korea has rapidly emerged as a major force, now rivaling the U.S. in the volume of tank and artillery orders.
Since Russia’s invasion of Ukraine, global defense spending has surged dramatically. As Europe struggles to ramp up its own weapons production, demand for non-Western suppliers, especially South Korea, has risen sharply. South Korea now ranks third in fighter jet exports, following the United States and France. Its KF-21 fighter jet, a 4.5-generation aircraft scheduled to enter the market next year, has already drawn global attention for its advanced technology and cost efficiency.
Meanwhile, Russia’s arms exports have fallen by nearly 50% due to the war in Ukraine and extensive international sanctions. Once a dominant supplier, Russia now ranks seventh among global weapons exporters, behind China. These trends reveal how ongoing conflicts are reshaping the global defense industry, shifting power from traditional exporters toward new players like South Korea and revitalizing competition in an increasingly militarized world economy.
Iran, Russia, and the Growing Crisis
The $1.75 billion agreement between Russia and Iran to jointly produce Shahed drones inside Russia has turned into a source of tension between the two countries. Iran, once the main supplier, now feels sidelined and humiliated. Not only has it fallen behind in providing operational support, but the mass production of Shahed drones in Russia has driven down prices, effectively eroding Iran’s role in the partnership.
On the diplomatic front, Donald Trump has declared that the entire world should cut ties with Iran, emphasizing that containing Iran is one of his top foreign-policy priorities. He even suggested the U.S. could offer full cooperation with Tehran; if Iran suspends its nuclear program, a proposal that Iran has firmly rejected. In the U.S. Congress, 442 members of the House of Representatives recently voted in favor of strengthening Israel’s military presence in the Middle East, signaling bipartisan support for Israel’s defense posture. Meanwhile, a newly released report from the Financial Action Task Force (FATF) has placed groups such as Hezbollah and the IRGC Quds Force on its list of terrorist organizations. The FATF’s reinstated resolutions specifically target Iran’s nuclear, ballistic missile, and conventional arms programs, as well as activities viewed as destabilizing in the region. These measures call for:
Suspension of uranium enrichment, heavy water, and reprocessing activities
A ban on ballistic missile technology use
Sanctions on conventional arms exports to Iran
Travel bans and asset freezes for designated individuals and entities
Seizure of weapons and restricted materials transferred by Iran to state or non-state actors
These actions collectively underscore the tightening international pressure on Iran; economically, militarily, and diplomatically, while also reinforcing Israel’s strategic position in the Middle East.
The risk of a renewed and broader conflict involving Iran has grown significantly, this time under circumstances more critical than before, as much of Iran’s air defense infrastructure has been destroyed. Still, Iran retains some leverage. Its underground missile bases remain largely intact after Israeli strikes, and the country possesses hypersonic missiles, giving it a formidable deterrent capability. Meanwhile, the U.S. and Israel are working to develop high-powered laser defense systems to intercept incoming missiles, though these technologies are not yet operational.
According to data from Brown University, the United States has provided at least $21.7 billion in military aid to Israel over the past two years, a dramatic increase from the roughly $4 billion per year in earlier years. For the first time since the start of the conflict, the Israeli army can now operate inside Gaza without the constraint of avoiding harm to hostages. Yet despite two years of fighting, Israel has failed to eliminate Hamas, and the potential re-emergence of figures like Yahya Sinwar underscores the fragile nature of the current ceasefire.
The war with Hamas has so far resulted in 1,972 deaths, over 30,000 wounded, and 10,000 people suffering psychological trauma, leaving the region in a tense but temporary pause.
On the nuclear front, Iran and the International Atomic Energy Agency (IAEA) have failed to reach an agreement on the resumption of inspections. The IAEA’s latest report claims that Iran’s stockpile of 60% enriched uranium has risen from 408 kilograms to 441 kilograms. Although Donald Trump has expressed a desire for “good relations” with Iran, he insists that Tehran must never possess nuclear weapons.
Meanwhile, Iran is reportedly rebuilding its missile production sites that were destroyed by Israeli strikes in June, but currently lacks the planetary mixers necessary for producing solid-fuel missiles. Analysts suggest that Tehran may attempt to purchase these components from China before the U.N. sanctions are reinstated. The situation underscores a volatile and rapidly escalating geopolitical climate, one where diplomacy, deterrence, and destruction remain locked in a precarious balance.
After the assassination of more than 30 Iranian nuclear scientists, Tehran has moved its remaining personnel to hidden, heavily fortified sites under continuous protection. Reports suggest that Israel’s Mossad has compiled a list of roughly 100 of these individuals, referring to them grimly as “the walking dead.”
In the event of a new war, eliminating Iran’s leadership is believed to be part of Israel’s military contingency plan. Israeli officials have also warned that anyone who harms Israel will face a sevenfold retaliation. Israel’s nuclear arsenal is now estimated to be larger than North Korea’s, while both India and Pakistan continue to maintain nuclear stockpiles amid their long-standing regional rivalry.
As of 2025, estimates show that Russia still holds the world’s largest nuclear arsenal, followed by the United States, China, France, and the United Kingdom. This global balance of nuclear power underscores the enduring fragility of international security, a world where deterrence remains both a shield and a threat.
The Iranian government appears intent on enduring the next three years of a potential Trump presidency, hoping that a Democratic successor, perhaps someone like Gavin Newsom, might reopen diplomatic channels and usher in a new phase of engagement. However, a failure of deterrence could also influence future Democratic policy, especially if the next administration resembles the traditional, cautious approach of Joe Biden. History suggests how these shifts unfold, for example, George H. W. Bush’s war in Iraq paved the way for Bill Clinton’s repeated missile strikes against Saddam Hussein in the years that followed.
If Iran refuses to cooperate, the three major European powers; Britain, France, and Germany, are expected to bring Iran’s nuclear file before the United Nations Security Council by November, potentially setting the stage for military action.
The Taiwan Strait: The Next Flashpoint
Another major source of geopolitical risk lies in the Taiwan Strait, where rising tensions between the United States and China threaten to escalate into a global crisis. The economic dependence of both the G7 and BRICS nations on this strategic waterway is immense. The Taiwan Strait functions as a critical chokepoint in global trade, and any blockade or military confrontation there would trigger a worldwide logistics crisis, disrupting essential supply chains for both industrial and emerging economies.
Among BRICS members, China is the most dependent on this route 14.9% of its exports and 32.5% of its imports pass through the Strait. The United Arab Emirates and Iran follow, with Iran relying on it for 24% of exports and 9.4% of imports a level of dependence even higher than India’s.
Meanwhile, Beijing has intensified its military pressure on Taiwan. A massive military parade marking the 80th anniversary of the end of World War II showcased China’s growing power, attended notably by Vladimir Putin and Kim Jong Un a symbolic display of a strengthening China–Russia–North Korea axis opposed to the U.S. and its allies. Chinese military activity around Taiwan has been increasing for years, but analysts now warn that a direct Chinese invasion would be one of the most disruptive events in global markets. Such a conflict could severely damage not only regional stability but also the global economy.
Beijing had previously set 2027 as a deadline for achieving control over Taiwan, a target that continues to shape military planning and diplomatic calculations in both Washington and Beijing.
Another potential flashpoint on the global stage is Venezuela.
In a surprising move, President Nicolás Maduro reportedly offered the Trump administration extensive access to Venezuela’s oil and mineral wealth in a secret effort to ease tensions and avoid a possible U.S. military strike. Over several months, Maduro’s representatives proposed that American companies be granted majority ownership in Venezuela’s oil, gas, and gold projects. The plan also included reversing crude oil exports from China to the U.S. and severing energy ties with Russia, China, and Iran.
However, the Trump administration ultimately rejected these overtures, cutting diplomatic contact and ending months of backchannel negotiations. Meanwhile, opposition leader María Corina Machado, who recently received the Nobel Peace Prize, presented an alternative proposal to U.S. officials, one promising greater economic potential under a democratic transition.
At present, U.S. naval and air forces are amassing around Venezuela, reminiscent of the military buildup preceding the 2003 invasion of Iraq.
This escalating tension signals that Venezuela may once again become a critical battleground in Washington’s foreign policy strategy, with implications extending across Latin America and the global energy market.
Oil Markets Under Dual Pressure
All these geopolitical developments are contributing to a rising risk of higher oil prices. The oil market now faces two competing forces:
A downside risk — driven by a potential global slowdown, especially due to China’s weakening economy.
An upside risk — fueled by increasing military tensions and the possibility of supply chain disruptions.
Although U.S. shale oil production has expanded, the Middle East still accounts for about 30% of global oil output. Any significant conflict in this region would inevitably push prices upward. According to last year’s data, the world’s largest oil exporters were:
Saudi Arabia, exporting 6.42 million barrels per day,
Russia, with 4.87 million barrels per day,
followed by African producers, Canada, and the United States, which exported 3.97 million barrels per day.
On the import side, the leading buyers were:
China, with over 11 million barrels per day, making it the largest oil importer in the world,
Europe, and
the United States, which imported 6.59 million barrels per day, with Canada supplying 62% of that demand.
Interestingly, despite Western sanctions, Russia remains China’s top oil supplier, underscoring the deepening energy ties between the two powers. As global tensions rise and alliances shift, the balance between economic weakness and military risk will determine whether oil prices stabilize or surge once again.
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