In a rapidly shifting global landscape, real assets navigate geopolitical headwinds that shape their returns and risks. As conflicts intensify, trade alliances shift, and climate challenges mount, infrastructure, real estate, and commodities are increasingly at the mercy of external events. This article examines how post-2020 dynamics up to 2025 have transformed the environment for real assets and offers practical strategies for investors to thrive.

Understanding Real Assets in a Fragmented World

Real assets include tangible holdings such as residential and commercial real estate, infrastructure networks, and natural resources like energy, metals, and agriculture. Unlike financial assets, these investments depend on physical capacity, location, and operational factors that are highly sensitive to policy shifts, trade disruptions, and security concerns.

We are now in what PIMCO terms a fragmentation era with regional bifurcation. Trade blocs are realigning, supply chains are reshoring, and central-bank policies diverge across the US, Europe, and Asia. Such developments have turned geopolitics into a structural driver of regional performance for real-asset classes rather than a mere cyclical shock.

Transmission Channels of Geopolitical Risk

Geopolitical events feed into real-asset valuations through several key pathways. Understanding these critical risk transmission channels is essential for stakeholders seeking to anticipate market movements and preserve value.

• Trade policy and tariffs: Shocks to import and export costs influence capital spending and rental rates.
• Energy and commodity price swings: Conflicts and sanctions alter input costs and project economics.
• Inflation and interest-rate shifts: Rising uncertainty raises discount rates and cap rates.
• Regulation and political risk: Sanctions, ESG backlash, and defense spending reshape project returns.

Each channel exerts a unique pressure on supply, demand, and financing conditions, affecting asset yields, liquidity, and risk premia.

Regional Growth and Policy Divergence

Macro forecasts point to a regional bifurcation driving outcomes in 2025. U.S. growth is supported by robust consumption but faces policy uncertainty and sticky inflation. Europe grapples with energy costs but may benefit from more aggressive rate cuts later in the year, improving financing conditions for real estate and infrastructure.

Asia, led by China, contends with geopolitical friction, high leverage, and demographic headwinds. These factors weigh on property markets and infrastructure funding in emerging Asia, widening performance gaps across regions. Investors must calibrate portfolios to reflect varying central-bank trajectories and political risks.

Sector-by-Sector Impact Analysis

The intersection of geopolitics and real assets varies by sector. Below, we explore each and present a succinct summary of their respective challenges and opportunities.

Real Estate. After mid-2022 slowdowns, 2024 marked the start of a recovery in transaction volumes and valuations. Lower rates in 2025 may narrow bid-ask spreads, but higher-for-longer interest rates and ESG regulation could strain office and retail segments. Residential markets with constrained supply may outperform, especially in logistics-driven corridors shaped by reshoring investments.

Infrastructure. Governments in the U.S. and Europe are allocating record budgets to defense, digital grids, and transportation upgrades. This surge underpins demand for ports, data centers, and renewable energy projects. Longer-term contracts and availability-based structures can offer resilience against market volatility and regulatory shifts.

Energy & Commodities. Sanctions on oil-producing nations and OPEC production decisions have driven price spikes, fueling inflationary pressures. Simultaneously, climate goals push investment toward renewables and grid storage. Projects in LNG, pipelines, and carbon capture are capturing investor attention, blending security with sustainability.

Agriculture & Land. Climate extremes in 2024 aggravated supply risks for crops and livestock, interacting with food-security geopolitics. Export controls and trade disputes can disrupt fertilizer flows and grain shipments. Farmland with water access and diversified cropping systems offers a hedge against supply-chain fragmentation.

Data Insights and Case Studies

According to IMF analysis, major geopolitical risk events lead to an average 1% drop in global equity prices and a 2.5% decline in emerging-market stocks within a month. Sovereign credit-default swap spreads rise by around 30 basis points in advanced economies and up to 45 basis points in emerging markets. These shifts translate into higher discount rates for real-asset valuations, causing cap-rate expansions and funding cost spikes that can persist for quarters.

A notable example is the impact of the Ukraine crisis on European logistics assets. As trade with Russia plunged, port throughput fell by 12%, driving up demand and rents in western Europe. Logistic parks near major consumption centers saw occupancy rates exceed 95%, underscoring how supply-chain rerouting can favor well-positioned real estate. This demonstrates the importance of supply-chain resilience and strategic location in portfolio construction.

Strategies for Investors and Stakeholders

In a complex geopolitical environment, proactive strategies are paramount. Adopting a forward-looking approach can help preserve returns and navigate uncertainty.

• Diversify across regions and asset types to mitigate localized setbacks.
• Implement scenario analysis and stress testing for key geopolitical events.
• Focus on assets with stable, long-term contract structures and inflation protections.
• Engage with policymakers and community stakeholders to anticipate regulatory shifts.
• Integrate ESG and climate risk assessments to identify stranded-asset hazards.

Conclusion: Navigating an Era of Uncertainty

Global events have evolved into a fundamental force shaping real-asset performance. From shifting trade alliances to climate-driven resource security, geo-economic factors now dictate financing costs, cash flows, and valuation metrics. By understanding the interplay of policy, markets, and physical assets and adopting robust risk-management frameworks, investors and operators can unlock opportunities and build resilience.

As we move toward 2025 and beyond, the ability to integrate geopolitical insights into investment decisions will distinguish successful portfolios. In this era of fragmentation, staying informed, adaptable, and engaged is the key to thriving in the dynamic world of real assets.