December 2025 | The U.S. is fundamentally reshaping its economic and geopolitical relationships with the world, as reflected in its recently released National Security Strategy. The Administration’s approach to trade, industrial policy and alliances marks a decisive break from the post-Cold War order and the U.S.’ role therein.
Geopolitical risk dashboard
BlackRock Geopolitical Risk Indicator
The global BlackRock Geopolitical Risk Indicator (BGRI) aims to capture overall market attention to geopolitical risks, as the line chart shows. The indicator is a simple average of our top-10 risks.
Top 10 risks by likelihood
We see the geopolitical environment shaped by forces that are together driving a wholesale reordering of global political and economic relationships. These include rising trade protectionism, increased government interventions in markets, heightened global competition, ongoing efforts to resolve regional conflicts and an intensifying AI race.
Comparing market movements and attention
We have developed a market movement score for each risk that measures the degree to which asset prices have moved similarly to our risk scenarios, integrating insights from our Risk & Quantitative Analysis (RQA) team and their Market-Driven Scenario (MDS) shocks. We do this by estimating how “similar” the current market environment is to our expectation of what it would look like in the event the particular MDS was realized, also taking into account the magnitude of market moves. The far right of the horizontal axis indicates that the similarity between asset movements and what our MDS assumed is greatest; the middle of the axis means asset prices have shown little relationship to the MDS, and the far left indicates markets have behaved in the opposite way that our MDS anticipated.
Risk map
BlackRock Geopolitical market attention, market movement and likelihood
Selected scenario variables
How to gauge the potential market impact of each of our top-10 risks? We have identified three key “scenario variables” for each – or assets that we believe would be most sensitive to a realization of that risk. The chart below shows the direction of our assumed price impact.
We detail the key geopolitical events over the next year in the table below.
Source:
BlackRock Investment Institute, December 2025.
How it works
The quantitative components of our geopolitical risk dashboard incorporate two different measures of risk: the first based on the market attention to risk events, the second on the market movement related to these events.
Market attention
The BlackRock Geopolitical Risk Indicator (BGRI) tracks the relative frequency of brokerage reports (via Refinitiv) and financial news stories (Dow Jones News) associated with specific geopolitical risks. We adjust for whether the sentiment in the text of articles is positive or negative, and then assign a score. This score reflects the level of market attention to each risk versus a 5-year history. We assign a heavier weight to brokerage reports than other media sources since we want to measure the market's attention to any particular risk, not the public’s.
Our updated methodology improves upon traditional “text mining” approaches that search articles for predetermined key words associated with each risk. Instead, we take a big data approach based on machine-learning. Huge advances in computing power now make it possible to use language models based on neural networks. These help us sift through vast data sets to estimate the relevance of every sentence in an article to the geopolitical risks we measure.
How does it work? First we “train” the language model with broad geopolitical content and articles representative of each individual risk we track. The pre-trained language model then focuses on two tasks when trawling though millions of brokerage reports and financial news stories:
- classifying the relevance of each sentence to the individual geopolitical risk to generate an attention score,
- classifying the sentiment of each sentence to produce a sentiment score
The attention and sentiment scores are aggregated to produce a composite geopolitical risk score. A zero score represents the average BGRI level over its history. A score of one means the BGRI level is one standard deviation above its historical average, implying above-average market attention to the risk. We weigh recent readings more heavily in calculating the average. The level of the BGRIs changes slowly over time even if market attention remains constant. This is to reflect the concept that a consistently high level of market attention eventually becomes “normal.”
Our language model helps provide more nuanced analysis of the relevance of a given article than traditional methods would allow. Example: Consider an analyst report with boilerplate language at the end listing a variety of different geopolitical risks. A simple keyword-based approach may suggest the article is more relevant than it really is; our new machine learning approach seeks to do a better job at adjusting for the context of the sentences – and determining their true relevance to the risk at hand.
Market movement
In the market movement measure, we use Market-Driven Scenarios (MDS) associated with each geopolitical risk event as a baseline for how market prices would respond to the realization of the risk event.
Our MDS framework forms the basis for our scenarios and estimates of their potential one-month impact on global assets. The first step is a precise definition of our scenarios – and well-defined catalysts (or escalation triggers) for their occurrence. We then use an econometric framework to translate the various scenario outcomes into plausible shocks to a global set of market indexes and risk factors.
The size of the shocks is calibrated by various techniques, including analysis of historical periods that resemble the risk scenario. Recent historical parallels are assigned greater weight. Some of the scenarios we envision do not have precedents – and many have only imperfect ones. This is why we integrate the views of BlackRock’s experts in geopolitical risk, portfolio management, and Risk and Quantitative Analysis into our framework. See the 2018 paper Market Driven Scenarios: An Approach for Plausible Scenario Construction for details. MDS are for illustrative purposes only and do not reflect all possible outcomes as geopolitical risks are ever-evolving.
We then compile a market movement index for each risk.* This is composed of two parts:
- Similarity: This measures how “similar” the current market environment is to our expectation of what it would look like in the event the particular MDS was realized. We focus on trailing one-month returns of the relevant MDS assets.
- Magnitude: this measures the magnitude of the trailing one-month returns of the relevant MDS assets.
These two measures are combined to create an index that works as follows:
- A value of 1 would means that the market has reacted in an identical way as our MDS indicated. We call this “priced in.”
- A value of zero would indicate that the pattern of asset prices bears no resemblance at all to what the MDS for a particular risk would indicate.
- A value of -1 would indicate that assets are moving in the opposite direction to what the MDS would indicate. Markets are effectively betting against the risk.
*This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any funds, strategy or security in particular. The scenarios are for illustrative purposes only and do not reflect all possible outcomes as geopolitical risks are ever-evolving.