Markets oblivious to geopolitical risks

Washington's military action and democratization efforts in the Middle East are creating unprecedented instability in the most important oil-producing region in the world - instability that will likely increase during 2006.

Growing instability in the Middle East has made global geopolitical risk extreme. Investors worldwide have yet to link extreme global geopolitical risk with high global economic growth risk, as evidenced by the very modest impact these rapidly rising risks have had on the world's financial markets. Risk perception may finally meet actual risk this year, sending interest rates soaring and stock markets plummeting around the world.

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