On Tuesday, 17 March 2026, we held our annual Board Leadership Center webinar on the top geopolitical trends impacting the business environment.
To help better understand today’s increasingly complex, volatile, and uncertain geopolitical landscape and its potential impacts for the years ahead, we were pleased to welcome back Stefano Moritsch, KPMG’s Global Geopolitics Lead.
The global operating environment has shifted into a period of sustained geopolitical pressure. The post–Cold War phase of relative stability has given way to a more fragmented system, marked by weaker international coordination, declining effectiveness of multilateral institutions, and intensified competition among major and mid-sized powers.
This systemic fragmentation has reduced the ability to manage shocks collectively, increasing the frequency, duration, and spillover effects of geopolitical disruptions. For businesses, this marks a structural change: geopolitical risk is no longer episodic, but a persistent feature of strategic planning.
One consequence of this fragmentation is a sharp rise in conflict-related risk, particularly where geopolitical tensions intersect with critical economic infrastructure and trade choke points. Developments in the Middle East illustrate how regional crises can rapidly transmit global effects.
Heightened risk perceptions around one of the key maritime chokepoints ‘Strait of Hormuz’, have been sufficient to disrupt oil and gas, shipping, insurance, and commodity markets. The result has been sustained pressure on energy prices, inflation, and industrial inputs, with downstream effects on food systems and manufacturing. Over time, prolonged instability also raises questions about capital allocation and long-term investment attractiveness in affected regions.
Against this backdrop, the conflict in Ukraine remains a central feature of the European risk landscape. The most likely near-term outcome is continued conflict, with irreconcilable positions between the parties to the conflict making diplomatic progress unlikely in 2026.
For businesses, the primary concern is about spillover risks. These include a greater reliance on hybrid tactics, particularly drone incursions and cyber activity targeting critical infrastructure, logistics networks, and corporate systems. As a result, cyber resilience is becoming a core component of geopolitical risk management for European and globally exposed firms.
The conflict has also driven the largest spending commitment in European defense and security in decades. This could potentially spark a new wave of industrial and infrastructure-related investment in Europe for the next 10-20 years.
Beyond energy and physical supply chains, geopolitical risk is increasingly concentrated in less visible but highly critical infrastructure. Global digital trade depends heavily on undersea data cables that carry about 95% of international data and financial transactions, worth more than USD 10 trillion each day.
This infrastructure is exposed to accidental damage and deliberate interference, while ownership, maintenance, and governance are highly concentrated. Rising awareness of this vulnerability is likely to accelerate public and private investment in redundancy, monitoring, and resilience, particularly as digital dependence continues to grow.
These security concerns are reinforcing a broader shift in global trade policy. Efficiency-driven globalization is giving way to a model focused on resilience, security, and control. Governments are also intervening more aptly in trade and supply chains, rising tariff and non-tariff barriers to protect domestic producers and supply chains deemed essential for national security purposes (i.e. semiconductors, dual-use technologies, critical minerals and rare earths, food, energy, etc.). For companies, this has direct implications for supply chain design, regulatory compliance, and cost management. Highly complex, geographically dispersed networks are being simplified, regionalized, or duplicated. The increased US tariffs are adding to the cost of doing business with the biggest market in the world, and the European countries that are most exposed to that trade could suffer in terms of impact on their GDP growth. However, the lack of tit-for-tat tariff retaliation by key US trading partners and a spur in bilateral and regional trade agreements as a tariff hedging strategy seem to be partially softening the blow to international trade.
Within this environment, relations between the world’s two largest economies continue to shape global trade dynamics. While strategic competition remains, recent developments suggest a more managed approach, reducing the near-term risk of abrupt, system-wide decoupling.
That said, a gradual divergence is underway in sectors considered critical to national security, including technology, advanced manufacturing, and critical minerals. Companies with exposure to both markets increasingly seek to reduce interdependence, localize decision-making, and build operational flexibility to remain viable across jurisdictions.
Technology (particularly AI) is both a driver of growth and a source of new geopolitical and operational risk. Diverging technology ecosystems are forcing strategic alignment choices for companies and governments alike. Europe’s technology stack remains more aligned with the US, but they’re also trying to push for digital sovereignty.
At the same time, the expansion of AI infrastructure is constrained by physical resources. Rising energy costs are increasing the operating expense of data centers, while water availability for cooling is emerging as a material location and continuity risk. These constraints are likely to influence future investment decisions as much as regulation or geopolitics.
Despite elevated global risk, opportunities remain where structural trends align with relative stability:
