Cyber, Geopolitical, and Financial Risks in Rare Earth Markets and the Unpacking of Market Volatility and Future Implications

Highlights

• A comprehensive study reveals financial volatility as the primary driver of instability in rare earth material markets.
• Geopolitical tensions and cyber risks amplify market uncertainties, particularly during global crises like COVID-19 and trade wars.
• The green energy transition adds complexity to rare earth markets, creating new price pressures and strategic challenges.

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Rare earth materials (REM) are the backbone of modern technology, driving everything from electric vehicles and energy storage batteries to wind turbines and solar panels. However, these essential resources are deeply entangled in global economic, political, and technological uncertainties. A new study by Emilia Calefariu Giol, Oana Panazan, and Catalin Gheorghe of Transylvania University of Brasov, published in Risks (2025), examines the complex interplay of cyber threats, geopolitical tensions, and financial instability in the REM market from 2014 to 2024.

The study hypothesizes that financial volatility is the dominant force driving market instability, with geopolitical tensions and cyber risks acting as major amplifiers. To test this, the researchers employed Time-Varying Parameter Vector Autoregression (TVP-VAR) and wavelet analysis, methodologies designed to capture both structural and short-term fluctuations in REM markets. Their approach integrates multiple financial indices (SOLLIT, PICK, SPGSIN, GSPTXGM, MVREMXTR, and XME), green energy prices, and geopolitical events to assess their collective impact on market dynamics.

Findings–A Market at the Mercy of Global Disruptions

The authors find financial volatility is the primary driver of instability. The study confirms that financial shocks, particularly global market uncertainty, exert the most sustained impact on REM markets. The VIX index—a widely recognized measure of market fear—was found to have the strongest correlations with REM price movements. In crisis periods like the COVID-19 pandemic, the 2018–2019 U.S.-China trade war, and the Russia-Ukraine conflict, financial volatility heightened risk perceptions and created cascading effects across rare earth supply chains.

While financial volatility is cyclical, geopolitical risks introduce long-term disruptions. The study highlights the 2018–2019 U.S.-China trade war and the ongoing Ukraine conflict as prime examples of geopolitical instability affecting REM markets. Export restrictions, trade disputes, and regional conflicts significantly impact supply chain security, making rare earth markets highly sensitive to global tensions. The data confirms that geopolitical risks tend to create persistent market uncertainty rather than short-term price spikes.

While not the primary driver of REM instability, cyber risks act as volatility amplifiers during crisis periods. The researchers identified notable cyberattacks on energy and industrial supply chains in 2016–2017, 2019–2020, and 2022–2023—periods coinciding with heightened geopolitical and financial instability. These attacks, often targeting logistics infrastructure, industrial control systems, and financial platforms, disrupt supply chains in unpredictable ways, further exacerbating market uncertainty.

As renewable energy adoption accelerates, green energy prices have begun to exert an increasing influence on REM demand and price stability. The study finds that when green energy prices rise, REM markets become more volatile due to heightened demand for critical materials like lithium, cobalt, and neodymium. However, this effect is inconsistent—market responses vary depending on external factors such as regulatory changes, global investment in renewables, and supply constraints.

Key Takeaways

1. Financial crises disproportionately impact REM markets, making them highly sensitive to investor sentiment and global economic shocks.
2. Geopolitical conflicts introduce long-term supply chain disruptions, reinforcing the need for diversified sourcing strategies.
3. Cyber risks, while episodic, act as amplifiers, exacerbating instability when combined with financial and geopolitical shocks.
4. The green energy transition creates new price pressures, adding another layer of market volatility requiring strategic management.

Limitations and Areas for Further Research

Despite its comprehensive approach, the study acknowledges key limitations. First, cyber risks remain underreported due to corporate secrecy and national security concerns, making their full impact difficult to quantify. Second, rare earth market data remains limited, as pricing transparency is often obscured by private contracts and government interventions. Third, the study does not fully account for emerging technologies like AI-driven supply chain optimization, which could mitigate some volatility risks in the future.

Future research should explore how AI and blockchain technologies could enhance REM market transparency, how rare earth recycling initiatives can offset supply chain risks, and how geopolitical alliances are shaping the future of resource security.

Implications

Rare earth elements are central to the global energy transition, so governments, industries, and investors must act decisively to mitigate market risks.

These include 1) diversification reducing dependency on China, 2) cybersecurity as a priority, 3) financial hedging strategies, and 4) international collaboration (tight networks of allies key, as Rare Earth Exchanges has reported).

As the world shifts toward clean energy and resource independence, rare earths will be at the center of a global battle for technological and economic dominance. The real question is—who will control the future of these critical materials, and who will be left scrambling in the wake of escalating volatility?