Impact of Geopolitical conflicts on Sustainable Financial Management for Blue Economy Development

Abstract

Geopolitical conflict has become a major source of fluctuations and unpredictability in global financial markets. Geopolitical conflict affects equity markets, currencies, commodity prices and the overall confidence and risk appetite of investors globally and maritime territorial tensions, has created significant challenges for the sustainable development of the blue economy.. The objective of this paper is to analyze the effects of geopolitical risk-defined here as risk generated from war, diplomatic crises and large-scale conflict in the world-on global financial markets, mediated by channels of risk aversion, supply shocks in commodities and trade disruptions. Strategies that support the sustainable utilization and conservation of aquatic resources under conditions of geopolitical uncertainty. The empirical methodology employs secondary data and utilizes information on the Geopolitical Risk (GPR) Index, developed by Caldara and Iacoviello (2018), along with several key financial market indicators. Key financial variables include global equity indices, currencies exchange rates, bond yields, crude oil price. The sample of analysis consists of daily observations during the period 2014.1 - 2024.12. A quantitative analysis using Micosoft Excel, Python (Pandas, Statsmodels) and R/EViews has been performed. Our results reveal an integrated framework linking geopolitical risk, sustainable financial management, and blue economy development, providing guidance for policymakers, financial institutions, and environmental managers. Significant negative response in equity markets, whereas safe-haven assets like gold and USD respond positively to geopolitical risk. Correlation and OLS regression results present evidence for these relationship most consistently and reliably. Volatility modeling in the framework of GARCH, though not providing a primary support to the above relationship, provides an auxiliary tool to acknowledge time-varying risks and volatility persistence.