Leaders at the 2026 World Economic Forum in Davos voiced growing alarm over a fragile global economy, citing a 4.2% contraction in global trade volume and a 37% rise in geopolitical risk indicators since late 2024. The summit underscored deepening divisions between major economic blocs and rising military tensions in multiple regions.
- Global merchandise trade volume declined 4.2% in second half of 2024
- Geopolitical risk index rose 37% since January 2024
- Inflation-adjusted trade costs increased 18% year-on-year
- S&P 500 dropped 2.3% over two weeks, MSCI World fell 3.1%
- U.S. 10-year Treasury yield reached 4.8%
- Crude oil prices surged 9.4% amid supply chain concerns
Senior policymakers and business executives gathered in Davos this week delivered a stark assessment of the global economic outlook, describing the world as 'on a precipice' amid mounting trade disruptions and geopolitical instability. The forum's annual risk report revealed a 4.2% decline in global merchandise trade volume during the second half of 2024, the sharpest drop since the 2008 financial crisis, driven by new tariffs and supply chain fragmentation. The situation has triggered a 37% increase in the Global Geopolitical Risk Index since January 2024, with conflict zones in Eastern Europe, the Indo-Pacific, and the Middle East contributing significantly. Inflation-adjusted trade costs rose by 18% year-on-year, particularly affecting critical sectors such as semiconductors, energy, and agricultural commodities. Major economies including the United States, China, and the European Union are now operating under divergent trade frameworks, with bilateral agreements eroding in favor of regional blocs. Financial markets reacted sharply: the S&P 500 dropped 2.3% over the past two weeks, while the MSCI World Index fell 3.1%, reflecting investor unease. Yields on U.S. 10-year Treasuries climbed to 4.8%, signaling rising risk premiums. The Euro Stoxx 50 index registered its largest one-day decline in 14 months, and crude oil prices surged 9.4% amid concerns over potential disruptions to key shipping lanes. The forum's concluding statement called for a coordinated reset in multilateral trade governance, urging G20 nations to reconvene by June 2026 to address supply chain resilience and conflict de-escalation protocols. While no binding agreements were reached, several multinational corporations announced plans to diversify sourcing, with Samsung and Siemens stating they would shift 20% of critical component procurement away from high-risk regions by 2027.