Geopolitical Hybrid Threats 83rd edition – June 2026

The development of the novel index enables us to analyse the macroeconomic and financial impact of geopolitical hybrid threats, combining several strands of literature. Our findings show that hybrid threat shocks primarily dampen economic activity by weakening aggregate demand. This contrasts with the predominantly supply-side effects of geopolitical risks resulting from outright military conflicts, as documented in the existing literature (e.g. Caldara and Iacoviello 2022, Bondarenko et al. 2024, Caldara et al. 2026). In this sense, the impacts of hybrid threat shocks align more closely with the macroeconomic consequences of uncertainty shocks (e.g. Leduc and Liu 2016, Basu and Bundick 2017, Deutsche Bundesbank 2025). This association is intuitive, as the objective of hybrid warfare is to destabilise societies and sow fear and uncertainty among the target population. The resulting loss of confidence leads to increased caution among businesses and consumers, which in turn dampens aggregate demand rather than constraining supply. Consequently, monetary policy is eased, and fiscal policy expanded through higher defence spending, financed by public debt. Overall, our analysis suggests that the stimulative effects of these expansionary policies do not offset the negative demand effects of hybrid threat shocks.