Investing.com -- In a year defined by volatility, Yardeni Research says 2025’s “most spectacular and reliable bull market has been in geopolitical crises.”
From flashpoints in South Asia to turmoil in the Red Sea, conflict and uncertainty have increasingly dictated market behavior, with safe-haven assets like gold rallying sharply as global tensions escalate.
“Even in this most tumultuous of environments, though, virtually no one had nuclear-armed India and Pakistan coming to literal blows on their Bingo card,” Yardeni Research said in a note.
Yet, missile strikes by India on multiple targets in Pakistan—including in Pakistan-administered Kashmir—marked a dramatic escalation. “When ‘#IndiaPakistanWar’ is trending on social media, you know global markets have got issues,” the note states..
Meanwhile, relations between the U.S. and China remain strained, even as officials prepare for fresh trade negotiations. In China, the effects of U.S. tariffs are sparking rare public protests, with factory workers demanding back pay.
Yardeni notes Goldman Sachs’ estimate that “as many as 20 million mainland jobs are directly dependent on U.S.-bound shipments,” highlighting the deep vulnerabilities within China’s export-driven economy. A rate cut by the People’s Bank of China this week underlined the growing concerns.
In Washington, U.S. President Donald Trump has taken a surprising stance by declaring that the U.S. “doesn’t need to sign any” trade agreements, despite escalating tariffs.
One exception is a deal with Ukraine, described as “more of an offer that Ukraine’s President Volodymyr Zelensky couldn’t refuse.” While it gives the U.S. access to Ukrainian resources, the absence of security guarantees leaves the Russia-Ukraine war to continue to “wreak havoc.”
Tensions have also flared in the Middle East. After launching airstrikes on the Houthis in Yemen earlier this year, Trump has now claimed the Iran-backed group has “capitulated,” prompting a halt in bombings. But the situation remains fluid.
“Only those still on the infamous Signal app chat probably know the full story behind Trump’s pivot,” the note adds, raising questions about whether Israel will follow Washington’s lead—or potentially escalate by targeting Iran directly.
From OPEC+ surprise production increases to deflation warnings in China, Yardeni paints a picture of a global economy overshadowed by political instability.
“If tensions in the Red Sea, or myriad other hotspots, heat up, the only thing that might be in shorter supply than safe havens is sleep,” it concluded.