Global economy ‘resilient’ in the wake of massive disruption

“It’s amazing how resilient and flexible the global economy is” in the wake of current geopolitical trends that are reshaping the investment landscape, said Jack Aldrich, BlackRock’s director for geopolitical research and strategy.

Aldrich described the present geopolitical risk landscape during a recent webinar by the National Association for Fixed Annuities.

“It’s an extraordinary moment geopolitically and has been since the start of the year,” Aldrich said. He compared the current geopolitical situation to other high-water marks in history, including the end of World War II in 1945, the Arab oil embargo of 1973 and the end of the Cold War in 1991.

“This may be a new geopolitical era,” he said. Aldrich noted several events that occurred so far in 2026, including the U.S. capture of Venezuelan leader Nicolás Maduro, the start of the war with Iran and the Supreme Court’s ruling that the International Emergency Economic Powers Act did not authorize President Donald Trump to impose sweeping, country-level tariffs.

Several disruptions will characterize the new world order that Aldrich said we may already be entering.

1. A lack of coordination and cooperation among major world powers will leave a structurally competitive U.S.-China relationship. Aldrich said he believes the relationship will remain stable through the end of the year, although this period of stability should not be confused with a permanent equilibrium.
2. Both parties in the Russia-Ukraine war are becoming exhausted, driven by Ukraine’s increased ability to bring the war to Russia. Aldrich predicted a ceasefire is likely in late 2026 or early 2027.
3. China is disrupting wide sections of the global economy. Chinese President Xi Jinping is doubling down on a continued export-led growth model, driven by long-term goals of self-reliance and decoupling from the West.
4. Militarization and defense spending worldwide are on the increase, with global military expenditure reaching a record $2.7 trillion in 2024.
5. Globalization is increasingly disrupted by geopolitics, with trade being rewired around geopolitics and increasingly occurring within geoaligned blocs.
6. Technological change is accelerating and existing in the backdrop of all these issues. Artificial intelligence is becoming a political and economic issue.

War in Iran has become a global event

The war in Iran “is clearly an uncertain moment,” Aldrich said.

“This has become a global event, not just a Middle Eastern event of war. It’s a confluence of geology, geography and geopolitics. With the Strait of Hormuz, Iranians found a more powerful deterrent than their nuclear program because they can actually use it.”

The war has taken unexpected turns for the Trump administration, Aldrich said. What started as a quick regime change has slowed. We are in an uncertain period, he said, as Iran uses the current ceasefire to adjust its tactics.

“If we resume fighting, things could look different,” he said. “We are waiting for a deal or no deal, and we continue to see skirmishes flare up.”

Control of ship traffic through the Strait of Hormuz remains at the center of the conflict, he said.

Aldrich predicted ship traffic in the strait will remain impaired well into June and likely beyond. The longer the duration of the war, the bigger the economic impact of closing the strait will be.

The global increase in military spending provides an opportunity from a market and investment perspective, Aldrich said, but also gives a warning.

“When military expenditure increases, there is a greater temptation or willingness to use it,” he said. “It is a more dangerous world, and that is increasing geopolitical volatility.”

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