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Chandrika Soyantar is an investment banker and founder Director at Amarisa Capital Advisor.
March 9, 2026 at 4:18 AM IST
Markets often move before dislocation is visible. Before oil fields are struck or shipping lanes blocked, the anchor itself can shift. On February 28, the first day of the recent war, the yield on the US 10‑year Treasury surged above 4% from the previous day’s 3.97%. In a geopolitical crisis, it should have fallen. Investors normally rush into these safe-haven government bonds during conflict, pushing yields lower—this time they sold them. The signal was clear. Geopolitics had moved the anchor.
The 10-year US Treasury yield surging past 4.1% on March 5 is not just another market signal. It is the anchor of global finance. Mortgages, corporate loans, and government borrowing across the world price themselves over it.
When the anchor rises, financial conditions tighten everywhere. In this regime, geopolitics does not merely add a risk premium. It moves the base itself.
For three decades, markets operated on a simple assumption. Capital flowed to efficiency. Supply chains stretched across borders, technology scaled globally, and investors searched for yield wherever returns were highest. Political risk existed but rarely determined allocation. That era ended.
The old world was global capital and local politics. The emerging one is local capital and global politics. Capital once disciplined governments. Increasingly, governments discipline capital.
Flagged Corridors
Nearly a fifth of the world’s oil transits the Strait of Hormuz. Yet oil moves only because risk is insured and cargo financed. When war‑risk premiums surge or insurers withdraw coverage, shipping slows or halts, even if no vessel is struck. A corridor can remain physically open yet economically constrained.
A quest for technological sovereignty is a major shift. NVIDIA’s advanced GPUs are now subject to US export controls. China has tightened mineral exports. The recently inaugurated semiconductor facility in Sanand reflects India’s efforts to achieve self-sufficiency under the Atmanirbhar mission.
Technology scales only within political guardrails. Cloud, compute, bandwidth, cables and satellites are increasingly being treated as sovereign infrastructure.
Ports around the Panama Canal, once neutral, are now jurisdictional assets. Panama’s annulment of a 30-year concession held by Hong Kong-based CK Hutchison underscored how logistics nodes carry strategic weight. Financial hubs such as Singapore gain prominence not for marginal efficiency but for geopolitical acceptability.
Conditional Capital
Reserve composition is shifting. Allocations once dominated by US Treasuries now tilt toward gold and diversified holdings, reflecting geopolitical hedging.
The separation between fiscal necessity and monetary action has become operationally thin. Large sovereign deficits, financed by borrowing, narrow the range of feasible tightening. Higher yields raise refinancing costs, eroding the cushion that safe‑haven flows once provided.
Against this backdrop, pressure mounts on the US Federal Reserve to cut rates, underscoring how central bank “independence” is increasingly contested. Monetary autonomy remains operational, not absolute.
Inflation now reflects the cost of sovereignty, resilience, and strategic autonomy.
Central banks function less as guardians of price stability and more as fiscal shock absorbers, preserving system stability.
Nominal growth operates within narrower bounds under this regime. The shift is structural, not cyclical. Risk and return are conditioned less by market cycles and more by policy corridors, geopolitical alignment, and asset dispersion.
Markets reflect this reality. Freight indices such as the Baltic Dry Index surge as costs rise across bulk routes. War‑risk premia spike or disappear altogether. Jurisdictions perceived as aligned attract liquidity and valuation premiums. Others face structural discounts regardless of operating metrics.
The cost does not stop with markets. Higher freight and energy costs raise input prices, working capital cycles lengthen, and SMEs feel the strain quickly. What begins as a geopolitical event becomes a balance‑sheet adjustment for firms and thin‑buffer sovereigns.
Cross‑border deals now require political clearance. Nippon Steel’s proposed acquisition of US Steel triggered presidential review framed around resilience and security.
Corporate behaviour follows the same logic. Decisions on where to list, borrow, or build are no longer neutral optimisations but geopolitical hedges.
Portfolio allocation is now conditioned by politics. Qatar’s most potent arsenal is not its missiles. It is the $500 billion sovereign wealth fund holding stakes in large and well-known companies across the world. Fund managers, pension managers, and private capital weigh jurisdictional stability alongside returns. Markets perceived as aligned attract inflows and valuation premiums; others face structural discounts. Investment is no longer a neutral search for yield but a strategic bet on alignment.
Inflation driven by freight and energy programmes reshapes household balance sheets. Mortgage rates, consumer credit, and savings returns are conditioned not only by domestic demand but by geopolitical alignment. Household economics now sit inside corridors defined by politics.
From Qatar’s LNG and large sovereign fund leverage to Nvidia’s restricted chips, from Panama’s port politics to insurance pricing in Hormuz, economic outcomes are increasingly shaped by security priorities and political alignment rather than efficiency alone.
Markets still rise and fall. Business cycles persist. But those cycles now unfold within boundaries defined by geopolitical risk. Geopolitics no longer operates at the margins of economic analysis. It sits within econometric models. Geopolitics now functions as a first-order economic variable.
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