How can banks support clients in today’s volatile geopolitical climate?

The ostensible answer is the provision of liquidity, but in the modern age, the answer is not so obvious. 

The successive shocks of the COVID-19 Pandemic, the Russia-Ukraine conflict, and recent developments in the greater Middle East have infused supply chains with a structural volatility that liquidity alone cannot manage. 

Combine that volatility with the rapidly developing capacity of artificial intelligence (AI) to process data at a pioneering rate, and something changes. Banks are no longer just vending machines for liquidity. In a geopolitical crisis, banks have become clients’ true operational partners.

What has stayed the same?

During the present geopolitical situation, traders turned to top-tier banks for emergency liquidity funding. Clients were broadly supported by banks, receiving six-month or one-year emergency loans.

In part, this was a lesson learned the hard way from Ukraine, just four years earlier. In 2022, extreme energy price swings triggered by the Russia-Ukraine conflict cascaded into a series of instant bankruptcies. Cash crunches left businesses unable to access instant liquidity. Markets responded with greater price spikes, which dragged more businesses under. 

Banks and businesses learned not to overlook liquidity. Strict banking regulations have since required larger cash buffers for corporates operating in sensitive geopolitical areas, and emergency loans were built into the quotidian workflow for banks.

The cooperation of banks and traders to stabilise emerging situations is also essential. The Russia-Ukraine conflict caused an immediate shortage of gas supply to Europe, in the middle of winter, with no obvious alternatives. The uncertainty threw markets into a frenzy.

2026 has been different. The conflict in the Middle East has halted roughly 25% of the world’s maritime oil trade. But that oil was to be globally distributed. Other trade routes continued to operate, and national reserves evaded an immediate supply shortage, limiting market uncertainty. 

Minimal uncertainty and the predictable stability ensured by widespread bank loans and guarantees enabled the market to distribute global energy supplies in an orderly manner. 

Global stability requires banks to protect immediate oil and gas funding; otherwise, they risk harming energy securities and future funding sources. But that liquidity is only one part of the picture. 

How data is changing the game  

For centuries, banks have served as a safe and trusted place to store money. Now, there is something more valuable in their vaults: information. 

In a crisis, the first thing affected clients choose is total transparency. Treasurers can share real-time shipping data and up-to-date paperwork for negotiations, insurance applications, and contracts. 

Facilitated by the physical flexibility electronic documents (e-documents) enable, banks can step in to assist with compliance checks and risk assessments, easing the administrative burden for clients. 

But, crucially, e-documents have led to an exponential increase in data. With thousands of customers, banks have access to data points throughout the supply chain that individual clients cannot see. 

With the development of large language models (LLMs), banks can combine client data with geopolitical updates, weather reports, credit ratings, and supply-chain bottlenecks: and process that data to map risk. 

That means banks have the capacity to analyse and predict liquidity needs more accurately, and avoid blowing past their own liquidity thresholds. They can analyse new supplier-buyer pathways to ensure an optimal supply of commodities, offering clients new opportunities where old ones may have collapsed.

As an example, the Middle East accounts for nearly half of all global seaborne sulphur exports. Sulphur is a key component of sulphuric acid, a chemical used in phosphate fertiliser manufacturing, uranium processing, and critical mineral extraction. 

Before the conflict, sulphuric acid accounted for a significant proportion of the production of various metals. It accounted for 3% of C1 costs (the costs of producing and selling a unit of metal) for lithium chemicals. For copper, this figure once stood at 14% of the cost of production, but has more than doubled in recent times, now standing at 30%. For lithium chemicals, the role of sulphuric acid has skyrocketed, nearly quadrupling to 11% of C1 costs since the conflict.

As such, on 1 May, pre-empting a global sulphur shortage, China, the world’s largest exporter of sulphuric acid, banned all exports of the good. 

But banks foresaw this domino effect. On 28 May, operations began at a large-scale sulphuric acid production plant in Kazakhstan, backed by the Swiss-based Eurochem Group. The production facility is set to have an average annual capacity of 800,000 tonnes and is accompanied by phosphate ore mining and processing facilities. 

As information becomes increasingly available, banks can predict challenges with growing accuracy and reshape global supply chains before bottlenecks happen. 

Building the infrastructure of the future

With presupposed geopolitical instability and the data to pre-empt what these risks may be, the maths has changed, and banks’ priorities along with it. Repeated crises have accelerated the push to diversify the supply chain to prevent single-point network failures. 

Banks are working with clients to target future bottlenecks. Financial institutions are actively shifting capital towards alternative projects such as local refining plants, alternative shipping routes, and green transitions to protect the global trade network. 

Critical minerals are a key example. Supply chains are inelastic. Oil and gas traders operate in huge, fast-moving financial markets that can use existing physical workarounds, such as cross-country pipelines that bypass slow-moving shipping lanes. Minerals, on the other hand, are not so easy. Their origins are fixed to very specific countries, and they rely on specific containers and shipping infrastructure. 

Fixing this vulnerability requires an investment that can overhaul the supply chain’s direction: opening new mines and building new processing facilities.

These projects are too big and too risky for clients to ask a single bank for a loan. Instead, banks are the new project instigators. Banks can bring multiple investors together, blending private capital with government grants and insurance guarantees to facilitate projects.

On 9 March, the Inter-American Development Bank (IDB), in collaboration with Export Finance Australia (EFA) and Japan Bank for International Cooperation (JBIC), announced a financing package of up to $1.175 billion for Rincon Mining to support the development and expansion of a lithium mining project in Salta, Argentina. 

By utilising development bank capital for the most costly infrastructure demands, and $160 million in commercial banks’ capital, backed by the JBIC, risk was spread. 

Blended capital arrangements bring us full circle: they enable a broad level of risk-sharing that functions where traditional financial arrangements fall short, making operating in a challenging zone, or with a geopolitically sensitive commodity, financeable.

Crises can no longer be treated as exceptional moments: after all, they now happen every two or three years. To this end, digitalisation and data, alongside partnerships with clients, have pushed the boundaries of financing. Banks now have the tools to finance initiatives to build a stronger global ecosystem. 

The Middle East and other Asian regions are important growth areas, both for resources and for financing opportunities. Banks will not just look the other way and provide a line of credit from afar; they are ready to harness data to ease the bottlenecks two or three years in the future.