Geopolitical Risks Trigger Turbulence in Global Markets: IMF Report Highlights Emerging Threats

The International Monetary Fund (IMF) highlights that geopolitical risks, including trade tensions, pose significant threats to financial stability by triggering significant stock price corrections. The report urges financial institutions to strengthen their capital and liquidity reserves. It emphasizes that international conflicts, such as Russia's Ukraine invasion, have notably impacted global stock markets.

The International Monetary Fund (IMF) has highlighted the considerable threat posed by geopolitical risks to global financial stability. In its latest report, the IMF warns that events such as trade tensions and military conflicts can lead to substantial stock market corrections.

The report emphasizes that international conflicts, particularly Russia's invasion of Ukraine, significantly impact global markets, pushing stock returns down by an average of 5 percentage points monthly. The IMF calls on financial institutions to maintain robust capital and liquidity buffers to withstand potential losses arising from these risks.

Additionally, the IMF's analysis shows that growing geopolitical uncertainties not only heighten market volatilities but also drive up sovereign risk premiums and potentially spill over to other economies. The full report is set to release at the IMF's upcoming meetings with the World Bank.

(With inputs from agencies.)