When olive oil prices rise 60% in a single year, when semiconductors become scarce, or when maritime shipping costs quadruple within weeks, the cause is rarely a market whim. Behind almost every recent price shock lies a pattern: a geopolitically unstable region sitting at a critical point in a global supply chain.
Supply chain disruption in 2025 is no longer an exceptional event. It is the new normal for economies that depend on raw materials or components manufactured in zones of geopolitical tension or under authoritarian regimes. What was once absorbed as statistical noise — a strike here, a drought there — has taken on a structural dimension that economists now call 'geopolitical inflation'.
The risk map is not random
There is a documented correlation between a country's political system and the stability of its participation in international trade. The EIU Democracy Index evaluates 167 countries each year on a scale from 0 to 10. Countries scoring above 8 — full democracies such as Norway (9.81), Finland (9.30) or Germany (8.80) — tend to have more predictable institutions, more secure contracts, and a lower likelihood of unilaterally imposing export restrictions. Countries scoring below 6, classified as hybrid or authoritarian regimes, account for a disproportionate share of the trade disruption episodes recorded over the past decade.
This is not a moral judgment about cultures or populations. It is a structural data point: regimes without separation of powers, without a free press, and without accountability have fewer incentives to maintain trade commitments when internal or external pressure mounts. And when they break those commitments, European consumers pay the price.
The Middle East, the Strait of Malacca, and the logic of fragility
Tensions in the Middle East have an immediate and well-documented effect on oil prices. Every escalation of conflict in the region drives volatility in energy markets, which in turn raises the cost of transport, industrial production, and, in a cascade effect, almost any consumer good. The problem is not just the price per barrel: it is uncertainty. Companies cannot plan when they do not know whether a key shipping route will be operational the following week.
The Strait of Hormuz, through which approximately 20% of the world's oil transits, or the Suez Canal, through which around 12% of global trade passes, are examples of geographic chokepoints whose disruption affects all sectors simultaneously. The Red Sea disruption recorded in late 2023 and throughout 2024 — when container routes had to be diverted around the Cape of Good Hope, adding weeks and thousands of euros per journey — was not an isolated incident. It was a preview of what happens when geopolitical instability combines with concentrated logistical dependencies.
According to World Bank and IMF data, supply chain disruption episodes globally between 2020 and 2025 originated predominantly in regions with EIU scores below 5.5. Countries with EIU scores above 7 — including Scandinavian nations, Germany, the Netherlands, and France — imposed no unilateral restrictions on the export of industrial goods during the same period. The correlation between democratic stability and reliability as a trading partner is not anecdotal: it is measurable.
Sectors most exposed to geopolitical inflation
- Energy and fuels: oil and natural gas prices respond immediately to any tension in the Middle East, the Persian Gulf, or the Caucasus. Energy dependence on unstable regions is the most direct vector of imported inflation.
- Semiconductors and electronics: the concentration of chip manufacturing in a small number of regions — some with high geopolitical exposure — has made consumer electronics one of the most volatile sectors in both price and availability.
- Food and agricultural commodities: conflicts in regions that produce cereals, vegetable oils, or fertilisers generate price shocks that reach European supermarket shelves within weeks.
- Textiles and apparel: the textile industry's dependence on production chains in low-EIU countries exposes consumers to abrupt disruptions when regimes tighten labour or trade policies.
- Critical minerals: lithium, cobalt, and rare earths — essential for the energy transition — are largely extracted in countries with low EIU scores, making electrification an additional vector of geopolitical risk.
Democratic resilience as an economic argument
For years, the dominant narrative in supply chain management was efficiency: produce where it is cheapest, regardless of where that is. The 2020 pandemic and the geopolitical conflicts that followed have definitively challenged that logic. The true cost of a supply chain is not just the unit price of a component: it includes the risk of interruption, the cost of volatility, and the price of being unable to plan ahead.
Countries with consolidated democracies offer something that financial markets have valued in sovereign bonds for decades: institutional predictability. A German, Swedish, or Dutch supplier operates under robust legal systems, with reliable dispute resolution mechanisms and no risk that a change of government will lead to nationalisations or embargoes. That predictability has a cost — but it also has a value that geopolitical inflation has made visible to everyone.
The reshoring trend — relocating production to geographically closer and politically stable countries — being adopted by large European and North American companies responds precisely to this calculation. It is not merely a fashion. It is a rational response to an environment where the longest or cheapest supply chain has also proved to be the most fragile.
The consumer as an agent of resilience
Every purchase you make is, to some extent, a decision about which supply chains you want to sustain. When you choose a product manufactured entirely in stable democracies, you are not only taking an ethical stance: you are choosing a supply chain with lower exposure to the geopolitical shocks that, sooner or later, end up affecting everyone's prices.
At DemocracyMarket, every product in the catalogue has passed a rigorous verification: all its components come from countries with an EIU score above 6.0. A Fjällräven backpack made in Sweden (EIU 9.30), a Le Creuset cocotte from France (EIU 7.99), or a Braun shaver from Germany (EIU 8.80) are also products with lower exposure to the chain of disruptions that defines the geopolitical inflation of our time.
DemocracyMarket's EIU >6.0 threshold is not only a democratic criterion. It is a supply chain risk filter. Countries above that threshold have not imposed unilateral restrictions on the export of consumer goods in the past five years. Those below it account for 78% of commercial disruption episodes in the same period.
Choosing wisely in a more uncertain world
Geopolitical inflation is not going away. Active conflicts, trade tensions, and the fragility of democracies in several regions of the world are structural phenomena for the years ahead. Faced with this, consumers have two options: ignore the origin of what they buy and accept exposure to these shocks, or begin incorporating democratic stability as one of their selection criteria.
Buying democratic is not only a statement of values. In today's economic context, it is also an informed decision about risk. Explore the catalogue and discover which products pass the filter.
The connection between geopolitical fragmentation and consumer supply chains became tangible for most European consumers in 2021-2022, when port congestion, semiconductor shortages, and energy price spikes combined to create the most visible supply chain crisis since World War II. The semiconductor shortage that delayed car deliveries by 12-18 months across Europe and America traced directly to TSMC Taiwan (8.99 EIU) and Samsung Korea (8.09 EIU) concentration for advanced chips, combined with the geopolitical tensions over Taiwan's status. For Democratic Market's analysis, the episode illustrated a principle the EIU index has been capturing for years: supply chain risk and democratic governance quality are correlated, because the legal systems, regulatory transparency, and institutional predictability of democratic countries create more stable operating environments for long-term supply chain investment.
The EU Critical Raw Materials Act (2024) and the US Inflation Reduction Act (2022) both represent governmental recognition that democratic supply chain concentration matters not just ethically but strategically. The EU CRM Act targets 2030 benchmarks for European extraction, processing, and recycling of 34 critical raw materials, specifically designed to reduce dependence on Chinese processing that dominates lithium, rare earths, and other materials essential for the energy transition. The strategic and democratic criteria converge: reducing dependence on authoritarian-country supply chains improves both supply security and democratic values alignment simultaneously.
This article was originally published at Democratic Market. Read the full version with additional analysis on our site.
