How does geopolitics affect financial markets?

Geopolitical events such as wars, sanctions, and diplomatic tensions can create uncertainty in financial markets, often leading to volatility. Investors may react by moving capital into safe-haven assets like gold or U.S. Treasury bonds. Conflicts can disrupt global trade routes and energy supplies, influencing commodity prices and inflation. Political instability in key regions may lead to currency fluctuations and changes in investor sentiment. Additionally, shifts in international alliances or economic policies can affect multinational corporations and market expectations. Financial markets often price in the potential for escalation or resolution, making them sensitive to news and developments related to global political affairs.