Geopolitical risk not reflected in current market pricing, says ECB vice president
By Benjamin Chiou
Date: Wednesday 14 Jan 2026
(Sharecast News) - The vice president of the European Central Bank has said that global financial markets are not adequately pricing in the downside risks from elevated geopolitical tensions.
In a speech in Madrid on Wednesday, Luis de Guindos said that the current environment of "profound transformation and heightened uncertainty" - driven by significant changes in US policy, the erosion of long-standing global trade dynamics and international relations, and elevated geopolitical risks - is "likely to persist".
The implications of these shifts is weighing on growth prospects, through delays to business investment decisions and weakened consumption, while disrupted trade patterns can "further complicate inflation dynamics", he said.
As a result, he believes that risks to growth are not currently being reflected across financial markets, with many equity benchmarks across the globe still trading at or close to record highs following a strong start to the year.
"Financial stability risks remain elevated as valuations are stretched in increasingly concentrated asset markets, non-banks exhibit liquidity and leverage vulnerabilities and increasing interlinkages with banks, while growing private markets remain opaque," he said.
The eurozone specifically is exposed to "external shocks and vulnerabilities" arising from geopolitical and trade developments, he said.
"High uncertainty in the global environment does not appear to be reflected in current market pricing. In fact, negative surprises-such as a re-escalation of trade or other geopolitical tensions, setbacks in artificial-intelligence advances with asset price adjustments or intensifying doubts regarding US fiscal credibility-could trigger abrupt shifts in sentiment, with spillovers across asset classes and geographies."
Special promo:
Trading the Forex Market? Visit FXmania.com to get advanced infomation about currencies and the Foreign Exchange
Market.
Email this article to a friend
or share it with one of these popular networks:
You are here: news
10 Lower Thames St,
London EC3R 6EN