Bi-Weekly Geopolitical Report – Middle East: Land of Fault Lines (May 6, 2024)

by Daniel Ortwerth, CFA | PDF

Conflict in the Middle East is one of the most persistent themes in current events.  Not only is this true today, but Middle Eastern discord has dominated the news flow throughout most of our lives.  At Confluence, we recognize that this enduring pattern of strife reveals the presence of many major fault lines that run through Middle Eastern society, politics, economics, and relations with the rest of the world.

A fault line is defined as a “divisive issue or difference of opinion that is likely to have serious consequences.” A major fault line is one in which the competing forces have both deeply embedded positions and the resources to support those positions.  Many issues of this type characterize those in the Middle East, which explains why conflict in the region is so common despite repeated attempts at resolution.  Investors must be prepared for this trend to endure for the foreseeable future, which will continue to meaningfully impact global affairs.

This report briefly reviews the main fault lines that define the Middle East from a geopolitical standpoint.  This is not a complete list, but rather it is a selection of those we consider most enduring and impactful.  Confluence does not take positions on these issues, but we will summarize and show how they produce complexity.  We arrange these prominent fault lines in three layers: the ancient fault lines, the more modern ones, and the present-day issues that are currently causing “geopolitical earthquakes.”  While these earthquakes do raise the risk of escalation into a broader regional war, we remind readers that the region has often witnessed this increased level of risk before without necessarily leading to further escalation.  Rather than trying to predict the outcome, we recommend that investors pay attention to key implications, which we will highlight at the end of the report.

Read the full report

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