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Mr. El-Erian, Ukraine, Middle East, Taiwan: What significance does geopolitics now have for the capital markets? Increased geopolitical risk poses a danger to both the global economy and the markets. For example, should there be an escalation of tensions between the… Iran and Israel come, this would drive up oil prices and create stagflationary headwinds for the global economy. This would undermine the already relatively weak growth prospects for the global economy, with the notable exception of the US and some other countries. It would also complicate the inflation picture at a time when the world’s influential central banks, led by the European Central Bank, are moving closer to cutting their key interest rates.

What could this mean for stocks? The resulting impact of such a scenario on companies’ prospects – particularly potentially lower profits and higher financing costs – would put stock markets on a bumpier ride.

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