Figures updated · Text reviewed · By the Riftrate team · How the index is built
A definition
The economists Dario Caldara and Matteo Iacoviello, whose index is one of the eight signals of Riftrate, define geopolitical risk as the threat, the realisation and the escalation of adverse events linked to wars, terrorism and tensions among states and political actors. The definition covers both threats (a military build-up, an ultimatum) and acts (an invasion, a bombing). Markets and governments often react to the threat before the act.
How it is measured
There is no thermometer for geopolitics, so every measure relies on a proxy:
- Newspaper counts. The Geopolitical Risk Index counts the share of articles in 10 major newspapers that discuss geopolitical threats and acts (Caldara and Iacoviello, American Economic Review, 2022).
- Event databases. Projects such as GDELT read news from around the world and code each event: who did what to whom, and how hostile it was.
- Expert ratings. Analysts score countries or risks, usually monthly or yearly.
- Market attention. The BlackRock Geopolitical Risk Indicator measures how often brokers and financial media discuss each of its top risks.
Riftrate combines a newspaper index with an event database, weighted by severity, coverage and the countries involved. The methodology explains every step, and geopolitical risk indices compared puts the main measures side by side.
Why it matters
Geopolitical shocks move energy prices when producers or shipping routes are at stake, push investors towards assets seen as safe, disrupt supply chains and raise insurance and defence costs. The markets page shows what oil, the dollar and safe havens did after each crisis since 2018.
Where it stands today
Riftrate reads 40.0 (Easing). Its highest reading since 2018 was 99.8 on 2 March 2022.
Frequently asked questions
What is a simple definition of geopolitical risk?
The risk that wars, terrorism, tensions between states or political upheavals disrupt the normal course of international relations, economies and markets.
How is geopolitical risk measured?
By counting newspaper articles about threats and acts (the Geopolitical Risk Index), by coding events reported in the news (GDELT), by expert ratings, or by combining several of these. Riftrate combines the first two.
What is the difference between geopolitical risk and political risk?
Political risk usually concerns one country: elections, policy changes, expropriation. Geopolitical risk concerns relations between states and armed conflict, and can hit many countries at once.
How does geopolitical risk affect markets?
Mostly through oil, safe-haven currencies, government bonds and the currencies of the countries involved. See how wars affect markets and the library.