Highlights

• Study shows geopolitical threats drive mineral prices higher than actual conflicts, with copper and nickel most price-sensitive.
• Non-technical risks like political instability amplify price volatility in critical mineral markets.
• Clean energy transition remains vulnerable to geopolitical risks, highlighting the need for supply chain diversification.

Jamel Saadaoui (opens in a new tab) and colleagues writing for Energy Economics (opens in a new tab) examined how geopolitical risks impact the prices of six critical minerals—aluminum, copper, nickel, platinum, tin, and zinc. Their hypothesis: geopolitical threats (anticipated risks) have a larger impact on mineral prices than actual geopolitical acts (wars, sanctions, or conflicts). They also propose that price sensitivity varies based on non-technical risks, such as regulatory uncertainty and political instability in mining regions.

Using time-varying parameter local projection (TVP-LP) regression models, the researchers analyzed monthly price data from 1985 to 2024 alongside global geopolitical risk indicators. Their framework allows for dynamic modeling of price shifts, revealing how shocks from major geopolitical events—such as the Gulf War, 9/11, and COVID-19—altered mineral prices over time.

Findings - The Cost of Uncertainty

The study confirms that geopolitical threats drive mineral prices higher than actual conflicts or disruptions. Market uncertainty, fueled by potential conflicts, leads to greater investment hesitancy and supply chain disruptions. Copper and nickel showed the highest price sensitivity to geopolitical risk, likely due to their role in energy transition technologies. Platinum, however, deviated from expectations—its price impact was muted, likely because of shrinking demand due to the rise of electric vehicles, which reduces the need for platinum-heavy catalytic converters.

According to the authors, another key takeaway is that non-technical risks amplify price swings. Countries with high political and regulatory risks see steeper price spikes during geopolitical turmoil. The study finds that reducing non-technical risks—such as streamlining regulations and ensuring stable policies—could buffer price volatility and strengthen supply chain resilience.

Red Flags and Data Limitations

While the study is comprehensive, some red flags emerge:

• Selection Bias – The study only includes six minerals, limiting generalization to all 50+ critical minerals used in clean energy and defense.
• Demand Factors Ignored – The research focuses on supply-side disruptions but underplays demand shifts, such as surging electric vehicle sales.
• Causality Challenges – The study links geopolitical events to price swings but doesn’t fully isolate external economic shocks (e.g., global recessions or policy changes).

Despite these limitations, the findings highlight a critical challenge: the clean energy transition is deeply vulnerable to geopolitical risk. Unless governments and industries act to diversify supply, chains and invest in domestic production, energy security will remain hostage to global conflicts and policy uncertainty.