Central Banks Shift Focus to Geopolitical Tensions as Top Risk

A recent survey conducted by Central Banking Publications reveals a significant shift in the priorities of global central banks regarding risk management. Nearly 70% of the 100 institutions surveyed, which collectively manage over $9.5 trillion in reserves, identified geopolitical tensions as their primary concern for 2025. This marks a notable increase from just 35% in 2024, when U.S. trade protectionism was the leading worry. The survey was conducted between January and March 2025, prior to the escalation of tensions related to Iran, indicating that concerns were already mounting due to earlier geopolitical frictions, including a dispute between the United States and Denmark over Greenland.

Global Market: Geopolitics overtakes inflation as top global risk for central banksReutersCentral banks’ concern over rising geopolitical tensions surges: surveyCentral bank survey: Geopolitical tensions become top global risk, confidence in the US dollar is tested, gold favored

Despite the immediate focus on geopolitical risks, inflation and interest rates remain critical factors in reserve management over a five-year horizon. Just over half of the central banks still consider these economic indicators as the most influential, although this is a decline from 76% in the previous year. Additionally, nearly 30% of respondents now view geopolitical factors as significant in their long-term planning, doubling the percentage from last year.

Global Market: Geopolitics overtakes inflation as top global risk for central banks

The survey also highlights a growing skepticism regarding the U.S. dollar's status as the world's primary safe-haven currency. Approximately 80% of reserve managers still regard the dollar as dominant; however, many expressed concerns about its long-term viability amid increasing global fragmentation. Notably, 16% of central banks indicated that the dollar's role would influence their reserve management decisions over the next five years, a sharp rise from just over 3% last year. Confidence in U.S. government bonds has also waned, with only one-third of respondents expecting them to outperform bonds from other Group of Seven economies and China, down from more than half last year.

Central bank survey: Geopolitical tensions become top global risk, confidence in the US dollar is tested, gold favoredReutersGlobal Market: Geopolitics overtakes inflation as top global risk for central banksCentral banks’ concern over rising geopolitical tensions surges: survey

In contrast to the declining confidence in the dollar and U.S. bonds, gold continues to be viewed favorably by central banks. Nearly three-quarters of the surveyed institutions reported holding gold in their reserves, with almost 40% considering increasing their exposure. This trend underscores gold's role as a hedge against geopolitical uncertainty and systemic risk.

ReutersGlobal Market: Geopolitics overtakes inflation as top global risk for central banksCentral banks’ concern over rising geopolitical tensions surges: surveyCentral bank survey: Geopolitical tensions become top global risk, confidence in the US dollar is tested, gold favored

Overall, the survey reflects a clear reassessment among global reserve managers, with geopolitical uncertainty now shaping both short-term risk assessments and long-term strategic decisions. As central banks navigate these evolving dynamics, the implications for global financial stability and reserve management practices will be closely monitored.

Global Market: Geopolitics overtakes inflation as top global risk for central banks