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The war in the Middle East is keeping the world on edge. In the event of escalation, energy shortages and a broader crisis loom. Yet this conflict is merely a symptom of a more fundamental shift: the global economic order is tilting. “Less cooperation, rising costs and a structural loss of efficiency are changing the rules of the game for governments and capital markets,” explains Thorsten Fischer, Managing Director and Head of Portfolio Management at Moventum AM. “It is not the next shock that matters, but the erosion of the system.”

The world may yet avoid a new energy crisis. However, this does not alter the fact that the international economic order is undergoing a transformation: uncertainty is increasing. The International Monetary Fund has already begun to respond, increasingly replacing traditional growth forecasts with reference scenarios and stress cases. “Uncertainty is no longer merely a risk,” says Fischer, “it has become the new baseline scenario.”

The era of a US-led, cooperation-based global order appears to be drawing to a close. What follows is not simply a shift in power dynamics, but a systemic loss of efficiency. “After all, international cooperation was never primarily an act of political idealism, but rather a model for optimising economic costs,” Fischer explains. Its decline inevitably leads to rising transaction costs, lower productivity and weaker potential growth. This will become particularly challenging if the productivity boost driven by artificial intelligence loses momentum, making it increasingly difficult to offset the structural loss of efficiency.

This is evident in several key areas:

- Security: NATO is losing political stability as an efficient cost-sharing mechanism. Europe is compelled to increase defence spending disproportionately, while the United States forfeits the efficiency gains of global alliances. Security thus becomes more expensive for all involved.

- Financial system: The dominance of the US dollar is coming under increasing pressure. The “exorbitant privilege” of low-cost refinancing has enabled the United States to sustain high deficits for years. Yet the foundations of dollar hegemony are now shaken. A fragmentation towards a multipolar currency system would reduce liquidity, increase financing costs and intensify market frictions.

- Global trade: Free trade is increasingly being replaced by politically driven structures. Export controls, tariffs, subsidies and industrial policy interventions are shaping the landscape. While the restructuring of global supply chains may enhance resilience, efficiency is suffering.

- Fiscal policy: The global fiscal situation is deteriorating in parallel. Despite robust economic activity, global debt continues to rise. The development in the United States is particularly striking, with budget deficits of seven to eight per cent of GDP occurring at near full employment. Rising interest rates are further exacerbating the sustainability challenges of public finances.

- Public expenditure: In the new world order, the structure of government spending is shifting. Higher expenditure on defence, debt servicing and industrial policy coincides with an environment of weaker growth.

Fischer’s conclusion: “Less cooperation leads to higher costs and lower productivity. The global baseline scenario is shifting from efficient growth to a ‘costly equilibrium’.”

For capital markets, this signals a fundamental change. Forecasts are losing their reliability, replaced by broader scenarios and ranges. Markets are increasingly operating in a “muddling-through” mode, where geopolitical events dominate in the short term while structural trends unfold in the background. “For investors, the key risk therefore lies not in the next geopolitical shock, but in the gradual erosion of the system itself,” Fischer explains. “The new world order is not only making financial markets more volatile – it is making them structurally weaker.”