State of Risk Webinar: Geopolitical Shocks Becoming ‘More Durable’

If 2026 has been a year of energy and supply chain shocks, 2027 is going to be the year of adapting to those shocks as they continue to play out over multiple geographies affected by multiple conflicts.

An Institute for Supply Management^® (ISM^®) webinar last week detailed how geopolitics is a driving force behind those shocks to supply chains — and geopolitical strife isn’t going away anytime soon.

“Geopolitical risk is clearly part of the energy landscape now in a more durable, more sustained way than we have seen,” Gregory Brew, senior analyst at global political risk research and consulting firm Eurasia Group, said during “State of Risk: From Global Disruption to Supply Chain Cost Impact.”

One of two speakers ­— the other was Tom Bundgaard, vice president of price forecasting at agrifood commodity market intelligence company Expana ­— Brew added, “We’ve had years of crisis — and crises are getting worse. Looking forward, the global supply chain as well as the global energy market will remain impacted by geopolitical risk stemming from three major conflicts that show no signs of ending anytime soon.”

Those conflicts are between:

• US./Israeli forces and Iran, with the on again, off again closure of the Strait of Hormuz and ongoing shipping/oil issues.
• Russia and Ukraine, which in its fifth year has increasingly become a conflict centering on around attacks on energy and on supply chains. The two countries are attacking each other’s energy infrastructure and targeting shipping.
• Saudi Arabia and Houthi rebels, with the latter notorious for disrupting shipping in the Red Sea and have more recently been attacking Saudi energy infrastructure.

The Lasting and Expensive Impacts

Such geopolitical conflicts are exposing infrastructure to violence — to direct attack, Brew said. They have had far-reaching impact across the end-to-end supply chain:

Shipping. “2026 is something of a banner year when it comes to attacks on shipping,” he said. “We’ve seen more attacks on shipping in 2026 than in any year since World War II. That also includes the tanker war in the 1980s in the Persian Gulf.”

Oil availability and price. “Flows have recovered over the last few months thanks to tremendous efforts that the U.S. is making at moving and escorting tankers through the Strait of Hormuz,” Brew said. “We have seen a recovery in regional flows to nearly pre-war levels, but it’s coming at a significant cost, and it’s retaining the risk that’s showing up in shipping, insurance, oil and fuel costs.”

Brew added that diesel prices have been resulting in policy changes, policy actions in the European Union and U.S. “But so long as these conflicts endure, which again is our expectation, we can expect high prices for both oil as well as refined products in this year as well as in 2027,” he said.

Inventory and supply security. Now that geopolitical risk and conflicts are directly exposing the movement of goods to disruption across multiple geographic regions, organizations are switching to just-in-case inventory strategies, he said, to find ways to build resilience, greater durability, and redundancy into their supply.

This adds cost: “Trying to build out resilience is always expensive,” he said, adding that supply chain security is going to continue to be a challenge.

Heed the Gray Rhinos

Not only do supply chains face black swan conflicts like wars, Bundgaard said, they also are challenged by gray rhinos: foreseen, known events like supply and demand, inventory, currencies and even weather.

“We know that in three months, the gray rhino is not going to be where it is today,” he said. Demand will be different; prices may be higher.

Black swans and gray rhinos both result in volatility — and organizations need to “accept these waves are never going to go flat,” he said. “There will always be volatility and it’s increasing.”

To manage volatility, Bundgaard said, organizations need to:

• Know your market. It’s critical to understand the fundamental data, inventories, cost drivers and the like, he said: “But you also need robust models to understand what drives prices and what to do about it.”
• Manage your risk. Control your exposure to risk by using such strategies as detailed commodity data and forecasting models. Financial hedging also may make a difference.
• Stay agile. Realize that no one price increase fits all when it comes to commodity pricing. Some commodities may increase 4 percent. Others, 30 percent. Still others might not change or could go down.

(Image credit: Getty Images/Your Photo)