Geopolitical Conflicts Could Cost Global Economy $14.5 Trillion

The global economy could face losses of $14.5 trillion over five years due to a geopolitical conflict that is disrupting supply chains and the insurance market, insurance market Lloyd’s of London said on Wednesday.

“With more than 80% of the world’s imports and exports, some 11 billion tonnes of goods, at sea at any given time, the closure of major trade routes due to a geopolitical conflict is one of the biggest threats to the resources needed for any resilient economy,” Lloyd’s said in a statement.

The economic impact would come from significant damage to infrastructure in the conflict zone and the potential for shipping lanes to be compromised.

The wars in Ukraine and Gaza have already disrupted shipping routes in the Black Sea and the Red Sea.

Lloyd’s sees the possibility of such a geopolitical conflict as a systemic risk – or a low probability but significant impact.

The company said it had also looked at other potential systemic risks in partnership with the Cambridge Centre for Risk Studies, including cyber attacks and extreme weather events.