Driven by the Russia-Ukraine war, the Global Geopolitical Risk index - compiled by Federal Reserve Board economists - is pointing to the highest level of perceived geopolitical risks since 2003 (when the US invaded Iraq).

• This is at levels that compare to a few other events in the series going back to 1900, where 100=normalized: the Suez Crisis, Yom Kippur War, and the USSR's invasion of Afghanistan for example.
• Market volatility doesn't always coincided closely with geopolitical risk rising: VIX spikes in 2008-09 (GFC), 2011 (Eurozone crisis), and 2020 (Covid pandemic) for instance were not joined by a similar rise in the Geopolitical Risk Index.
• This time around, geopolitics are arguably the major driver of financial markets, which on the basis of this metric marks the first time since the early 2000s.

Source: Caldara and Iacoviello; MNI; BBG