Geopolitical Risks Speak the Loudest

Violence should never be celebrated, no matter the circumstances.

Over the past three decades, I have witnessed moments of intense conflict and, strangely enough, the wave of hype or celebration that often follows. Whether it is missile launches or bombings that intentionally or unintentionally result in casualties such eruptions should never be a cause for jubilation. As for what we do best, we focus on markets and the ever-evolving investor sentiment. Yet, having grown up closely listening to politics and diplomacy chatter and having a keen interest in financial markets, a great use of free will, I cannot help but interpret geopolitical developments through these lenses.

Markets react in real time to shifts and often slip into the familiar sell-the-fact reflex. This time, an almost comic forward indicator, a surge in the aggregated pizza orders around the Pentagon as staff work intensely that they cannot afford the time for proper meals, nudged hedge funds into loading long positions in crude, of course, along with other headlines that suggested a higher probability for Israel-Iran escalation. CFTC Commitment-of-Traders report for the week ending 10 June 2025, managed-money net-long positions in crude climbed to roughly 195k contracts while total open interest pushed back above the 2 million-lot mark, grounding the pizza delivery tell in hard positioning data.

At the start of the following week, large bets were being unwound, Brent quietly giving back the spike from mid-sixties, adding up to 13$ in geopolitical risk premium before drifting lower. Price action alone suggests the geopolitical risk premium has peaked, at least for now, not pricing in major escalating such as oil distribution in the Gulf or restricted oil tank movement through the Strait of Hormuz. Meanwhile, the broader risk asset reaction has been relatively contained: the S&P 500 within a 2% high-low range, while 10-year Treasuries held elevated levels of 4.50%, and so did 30-year yields around 4.90%.

Though the premium has moderated from its initial surge, it remains elevated; to grasp how markets gradually ease such fear pricing, it’s useful to revisit past Middle East flashpoints.

Echoes of history, pulses of the present

Cast your mind back to flashpoints such as the Iran-Iraq war of the 1980s, Iraq’s invasion of Kuwait in 1990, the United States led Iraq intervention in 2003, the Hezbollah-Israel conflict in 2006, or the so-called Arab Spring that tore through Syria, Egypt and Libya beginning in 2011.

Each wave of destabilization failed to deliver genuine public dividends. In many cases, people traded one hardship for another watching infrastructure crumble, currencies buckle and opportunities migrate. The cumulative effect is a region that knows all too well the long shadow of uncertainty yet still hopes for a dawn when ambition is not handcuffed to instability.

Today, the Israel-Iran cross-border non-proxy conflict has stepped into broader daylight. Israeli strikes on nuclear-linked sites, Iran’s retaliatory salvos and bracing rhetoric from both capitals have pushed diplomats to the edge of their seats. Shuttle diplomacy thrives only when some sliver of compromise remains and at present, the promise of a quick off-ramp feels thin. Washington appears to play down to keep dialogue alive if only to hold global energy prices in check, Trump's red line I believe, but it feels that Washington is pleased with the nuclear sites hits.

As for now, what is needed in these times of tension is a shift in perspective away from the allure of immediate, forceful responses and toward sustainable, long-term solutions. It’s particularly concerning that young adults and teenagers are increasingly discussing intricate military details like the specifications of fighter jets and missile ranges etc., as if it were a norm. This focus toxically normalizes the language of warfare at a young age, which in turn underscores the urgent need to steer conversations toward peace, diplomacy and constructive progress.

While it might be easier to comment on these issues from 12,000km away, it’s a pressing need to channel energy and resources into initiatives that promise a brighter future. The focus should be on more development matters and fewer instances of these short-lived, conflict-driven celebrations. That’s the idealistic bubble, and happy with it since the alternative is ugly.

Against that backdrop, the region’s pivot from battlefields to bulldozers via headline mega-projects becomes a hedge against geopolitical volatility.

Why do the Middle East's big projects matter?

Large-scale development remains the clearest route to galvanize optimism. Grand endeavours such as The Line in NEOM, Qiddiya near Riyadh, the Masdar Green Hydrogen hub in Abu Dhabi, or Egypt’s new administrative capital are far from vanity exercises. These initiatives act as incubators for higher-order skills, complex financing structures, daring urban design and digital-first logistics that spill into schools, companies and the wider society. A set of challenges designed to propel individuals toward peak potential.

Critics highlight hefty capital expenditure, unpredictable payback periods and reliance on commodity-linked funding. Those concerns are valid, yet the alternative, falling behind while the global economy rewires and artificial intelligence rewrites job descriptions, is far riskier. Better to place informed bets on transformative infrastructure than to watch opportunity drift elsewhere.

Now and in the future

Despite the challenges and the sometimes harsh images broadcast by the round-the-clock news cycle, the Middle East remains a region of incredible cultural diversity and richness. It’s a place where many faiths and traditions have coexisted for centuries adding depth and complexity to its identity. Diversity is the region’s greatest unrealized asset because it fosters a talent for synthesis. Conflict headlines still command clicks, missiles spark social media frenzies and fear sells faster than hope. Yet the deeper prize lies in turning the spotlight from rockets to research parks and from zero-sum contests to positive-sum competitions.

On the economic front, the balance is already tilting from hydrocarbon dependency toward knowledge driven growth. Gulf sovereign wealth funds are funneling hundreds of billions into logistics corridors, artificial intelligence hubs and clean energy complexes. Regional local-currency bond markets are deepening, extending maturities and drawing a wider pool of global investors, while Riyadh’s and Abu Dhabi’s exchanges are expanding derivatives, sukuk and IPO pipelines - moves that thicken liquidity, sharpen price discovery and give corporates lower-cost access to growth capital. These shifts widen the region’s revenue base, anchor job creation for a predominantly youthful workforce and make macro-stability less vulnerable to conventional intervention.

Geopolitics may shout the loudest in the moment, but sustained development and the human potential it unlocks should always carry the longer echo.