Discrepancy Between Media Coverage and Financial Impact
Geopolitics has become a permanent fixture of the risk landscape, yet conflicts dominating headlines are not always those hitting bank balance sheets hardest, according to new research from the Italian consultancy Prometeia. The firm identified a distinct gap between media attention and the actual impact on financial institutions.
Prometeia noted that while international tensions such as the annexation of Crimea, the Brexit referendum, and the US-China trade war demonstrated how markets can be unsettled, Russia’s invasion of Ukraine in February 2022 made geopolitics a central economic risk once again. Since then, shocks have become more frequent, including conflict in the Middle East from October 2023, US tariff escalation in April 2025, and the war between the United States and Iran in February 2026.
The US-Iran conflict closed the Strait of Hormuz and pushed oil prices back to early-2022 levels. Prometeia described this event as the most far-reaching geopolitical event since the invasion of Ukraine.
Tracking Risks Through Earnings Calls
To analyze how these events affect financial institutions, Prometeia uses natural language processing to build two sets of indicators. The Geopolitical Pulse Index analyzes specialist Oxford Analytica coverage daily and includes cybersecurity and commodity price risks in line with the ECB’s 2026 stress test definition.
The second metric, the Geopolitical Bank Talk Index, examines banks’ quarterly earnings calls to show how risks spread through institutions. Prometeia used a large language model to separate “substantive” references, which link geopolitics to concrete effects on results or operations, from “contextual” boilerplate in earnings calls.
The news-based index peaked with the invasion of Ukraine and has stayed structurally elevated since, largely due to new flashpoints in the Middle East. Substantive commentary regarding Russia has dominated since 2015.
Quantified Impacts on European Banks
In 2022, banks immediately reported quantified impacts for Russia, such as deconsolidating Russian branches, making provisions for direct exposures, and absorbing losses on trade receivables. Russia’s invasion affected every impact area for European banks across seven categories.
In 2022, 18 institutions (40.9%) reported credit risk impacts for the Ukraine war, including specific provisions, Stage 2 reclassifications, and prudential buffers.
Shifting Focus to the Middle East
For the Middle East, banks mainly cited tensions as macroeconomic background even through the Gaza war. For the Middle East, 22.7% of banks reported credit impacts, almost entirely through buffers tied to gloomier macroeconomic scenarios.
Only two banks reported income statement effects for the Middle East. Risk appetite ranked second for Middle East impacts, and no bank has announced a structural exit from the region.
Signs of change emerged with the 12-day Israel-Iran war in June 2025. Substantive references to Middle East risks accelerated sharply after the US-Iran conflict began, growing fastest as energy and transport costs rose.
The impact of Middle East risk remains largely forward-looking, though recent signals suggest it may begin to turn into concrete effects.