Key takeaways
In recent months, the Eastern European war intensified as Ukrainian troops pushed into Russia and Russian forces continued to gain Ukrainian territory.
The conflict between Israel and Hamas expanded into Lebanon and even Iran, as Israel fought with Hezbollah.
Anticipated leadership changes around the world introduce a degree of uncertainty for global markets.
The geopolitical landscape is shifting as new leaders come to power across the globe amid persistent world tensions.
“2024 was notable because a meaningful proportion of the world, the U.S. included, held elections that resulted in changed leadership,” notes Rob Haworth, senior investment strategy director with U.S. Bank Asset Management.” While Haworth says 2025 may include fewer consequential global elections, “there are countries where additional changes could occur, such as South Korea, Germany, France and Canada.”
In the Middle East, military action expanded beyond the Israel-Hamas battle in the Gaza Strip to include Israeli attacks on Lebanon to directly confront Hezbollah. Israel and Iran have also exchanged air strikes. Separately, rebels in Syria overthrew the government of longtime leader Bashar al-Assad, leading to his ouster, but adding to uncertainty about the country’s direction and whether it could have regional ramifications.
As the war between Russia and Ukraine approaches its third anniversary, Trump has made strong statements about his desire to end the conflict. The terms of such a conclusion are unclear and many speculate he’ll be less supportive of Ukraine’s efforts than was outgoing President Joe Biden. Biden recently approved Ukraine’s use of long-range U.S. missiles in Russian territory and, in the weeks before leaving office, provided additional financial support to Ukraine. In response, Russian President Vladimir Putin hinted at the increased risk of Russia using tactical nuclear weapons, raising the risk of a widening conflict. In addition, he brought in North Korean troops to assist Russia’s war effort.
“Despite the valid concerns raised about the state of these conflicts, they don’t appear to be having a market impact,” says Rob Haworth, senior investment strategy director for U.S. Bank Asset Management.
“Despite the valid concerns raised about the state of these conflicts, they don’t appear to be having a market impact,” says Haworth. Nevertheless, there are variables that investors will be watching. For now, the greatest concerns are tied to economically sensitive targets. “A market or economic impact depends very much on how close the conflict gets to production facilities,” says Haworth. “To this point, agricultural and energy products are still being moved without major limitation, so that’s helping stabilize commodity prices.”
Oil markets are considered susceptible to current tensions, given their proximity (Middle East, Russia) to major oil production regions. Over much of 2024, oil prices hovered in a trading range near $70/barrel. “Lower U.S. inventories contributed to an uptick in oil prices,”1 says Haworth referring to prices rising to around $75 per barrel. “This is due to some short-term factors such as higher winter demand and may not represent a sustained oil price trend.” Nevertheless, Haworth says investors will continue to monitor oil inventories, particularly with demand driven higher once summer travel season is underway.
Despite ongoing conflicts on two, oil-sensitive fronts, Haworth notes, "It’s important to remember that compared to other periods, oil prices today are on the low end of the scale.”
Both Russia and Ukraine are major global suppliers of wheat and other agricultural products. This contributed to a temporary spike in agricultural commodity prices in the early weeks following Russia’s invasion of Ukraine in February 2022. Wheat prices, for example, have trended lower in recent months.2
Haworth notes that given the duration of the Russia-Ukraine conflict, commodity markets have generally adjusted to changing conditions. “The only durable negative impact has been on German chemical companies, which are suffering due to the lack of cheap natural gas.”
Europe is likely to feel more impact than is the case domestically. “In the U.S., we’re a bit more insulated from the economic fallout from the conflicts compared to other parts of the world,” says Tom Hainlin, national investment strategist for U.S. Bank Asset Management.
From an investment perspective, current conflicts have been overshadowed by other underlying market and economic fundamentals. In 2023 and 2024, equity markets prospered. With a new presidential administration taking over U.S. leadership, the timing of any changes to U.S. policy as it affects either the Russia-Ukraine or Middle East conflict remain unknown. “Capital markets won’t deal in guesses about what may come,” says Haworth. “They’ll wait for something more concrete.”
Be sure to talk to your financial professional about what steps may be most appropriate for your circumstances.
The most prominent conflicts in the world today are found in two geographic regions. One is Eastern Europe, where Russia and Ukraine have been involved in a war since Russia first attacked Ukraine in February 2022. In late 2024, tensions appeared to escalate, as Ukraine began firing U.S.-made missiles into Russia, and Russia raised the possibility that it would be less reluctant to utilize tactical nuclear weapons. The second, more recent conflict, followed a surprise October 2023 attack by Hamas against Israel. In short order, Israel responded with massive bombardments and by sending ground troops into the Gaza Strip. The war’s reach has extended into Lebanon, as Israel seeks to attack a Hezbollah stronghold, and Hezbollah has responded with rocket attacks into Israel. Israel and Iran have also been involved in what are, to date, modest conflicts.
To this point, the economic impact of these conflicts has primarily been regional in nature. In the immediate aftermath of Russia’s invasion of Ukraine in early 2022, oil prices soared. That reflected efforts by western nations to place economic sanctions on Russia, which is a major oil supplier. However, that price spike was short-lived. Oil prices rose at the start of the Israeli-Hamas conflict, but haven’t spiked to previous levels, and stabilized in the $70/barrel until, in recent months, prices rose modestly, closer to the $75/barrel range.1 While economic circumstances are extremely difficult for countries that are targeted in the current conflicts, the global impact has been muted. The U.S. economy continues to show significant stability despite global conflicts.
Stocks suffered through a bear market in 2022, though much of that was attributed to a changing economic environment. Most notably, the decision by the Federal Reserve to raise short-term interest rates beginning in early 2022 altered the investment landscape. Since late 2022, stocks recovered considerable ground. “The risk of an Israel-Iran conflict does raise greater concerns that Middle East military action could become more widespread,” says Rob Haworth, senior investment strategy director at U.S. Bank Asset Management. However, Haworth notes that the global conflicts currently aren’t having a significant impact on investor sentiment.
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