Geopolitical Risk Analysis

Overview

Quantify geopolitical risk signals, identify crisis precursors, and build event-driven strategies that convert narratives such as "war / conflict / sanctions / supply disruption" into actionable multi-asset allocation decisions.

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Core Analytical Framework

1. Risk Layering Model

Layer 1: Structural risk (long-lasting, slow-moving)
  └── Great-power rivalry, alliance structures, nuclear deterrence balance

Layer 2: Situational risk (cyclical escalation, monthly / quarterly scale)
  └── Military exercises, election cycles, sanctions escalation, diplomatic friction

Layer 3: Event risk (sudden shocks, daily / hourly scale)
  └── Military action, assassination, sanctions announcements, nuclear tests

2. Five Dimensions of Risk Assessment

Dimension	Description	Quantitative Proxy
Intensity	Severity of conflict / sanctions	GPR Index percentile
Persistence	Expected duration of the crisis	Futures curve contango / backwardation
Transmission	Spillover into supply chains / finance	CDS spread widening, VIX jump magnitude
Predictability	Whether the event is already priced in	Option implied volatility skew
Reversibility	Whether the situation can be resolved through negotiation	Speed of reversal in news sentiment

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Monitoring the Six Major Global Geopolitical Hotspots

1. Strait of Hormuz, Oil Transport Chokepoint

Strategic significance

• Roughly 20% of global oil supply (about 17 million barrels/day) and 20% of LNG passes through it
• Iran has the ability to disrupt the strait through mines, naval assets, and shore-based missiles
• It is the only export route for Gulf states such as Saudi Arabia, the UAE, Kuwait, and Iraq