Tolstoy challenges the idea history is driven by great leaders and says we should look to the role of vast systems, lower-level decisions, and unintended consequences as the forces of history. Sadly, these do not point to an idyllic peace ahead. Moreover, those who disagree with Tolstoy will look to the personalities of the great leaders having meetings in smoke-filled rooms and wonder what the outcomes will be.
The fog of war may deepen or lift ahead, with the tail risk of the former a key concern. Yet, investors and businesses eager for peace need to understand that peace achieved through victory, defeat, or short-term truce differ vastly in their economic and market consequences, and that either way, the previous world economic order is unlikely to return.
Resilience now requires diversified sourcing, as sides must be taken, spare capacity, strategic stocks, and contingency plans – all carrying a permanent price tag
War is now a spreading and conflating spectrum spanning economic coercion, blockades, espionage, grey zone sabotage, proxy conflicts, and direct confrontations on escalating scales aimed at economic targets. Rearmament and talk of economic security being national security is heard almost everywhere.
Excepting hopes for a global geopolitical and geoeconomic reset, of unclear and implicitly radical new design, we expect a world at P.E.A.C.E.: that is, Protectionism; Energy & commodities; Arms & AI; Central banks; and Economic statecraft.
Protectionism, which Napoleon tried vs the British, sees tariffs, non-tariff barriers, subsidies, local-content rules, and investment screening reflect a struggle over manufacturing capacity, critical technologies, and jobs. China’s trade surpluses and control over supply chains forces others to choose between dependence and rebuilding at home. The latter is costly and inflationary, but governments increasingly view redundancy as insurance rather than inefficiency. Countries and companies may be pressed to ‘pick a side’. Non-alignment is harder as the world fragments.
Energy and commodities sit at the centre of this calculus. Control of upstream inputs is essential, and refineries, pipelines, ports, and shipping lanes are military targets while insurance, finance, and logistics can be weapons. Specific energy shortage fears have spread from oil to diesel and other refined products, but similar concerns remain for critical minerals and copper. Resilience now requires diversified sourcing, as sides must be taken, spare capacity, strategic stocks, and contingency plans – all carrying a permanent price tag.
Arms and AI are merging industrial and military competition. Modern war consumes drones, munitions, data, semiconductors, satellites, and computing power. Rearmament reaches beyond defence contractors to grids, metals, engineering talent, cloud infrastructure, and advanced manufacturing. AI promises productivity gains and strategic advantage. Governments will ask who controls them and whether access can be denied. This is again zero-sum and comes at eye-watering cost: who pays (and borrows to do so) and who ultimately benefits?
In short, war means baseline macro tail risks are fatter and transmission channels interconnected
Central banks face higher demand as defence spending soars and lower efficiency on supply-chain shift and strategic duplication: higher bond yields reflect the strain on public finances and higher growth. Central banks also face exogenous supply-side shocks which monetary policy offers no answers for: they cannot ease physical scarcity, but may respond if prices and inflation expectations rise. The Bank of England, founded to finance the war vs Napoleon, underlines the logical risk of a push to align monetary, fiscal, and political objectives.
Economic statecraft binds the framework together: ‘Whatever it takes’ will take new forms that will surprise those expecting markets to always take the lead or be allowed free rein. In short, war means baseline macro tail risks are fatter and transmission channels interconnected: geopolitical shocks flow to energy, inflation, fiscal, and currency shocks in quick succession.
Yet P.E.A.C.E. institutionalises many changes now afoot. History will always unfold either way. Our choice is therefore not between pessimism and optimism, but between preparation and surprise.
Read the full report here.
Jan Lambregts is head of RaboResearch Global Economics & Markets
