Geopolitics and innovation: a new transformative frontier - Perspectives 2026

Over the last two years in Perspectives, we have highlighted the importance of understanding powerful forces of change. A number of these forces are unrelenting in their progress, and as investors, it is critical that we work thoughtfully and objectively with forces of change to uncover the opportunities they create for us.

As we move through 2026, the new global order highlighted in last year’s Perspectives is progressing at stealth speed. We are confronting a rapidly evolving global landscape shaped by two dominant forces: geopolitics and technological innovation. Together, they are redefining how capital flows, how economies grow and where long-term investment opportunities emerge. While the speed and scale of change can feel unsettling, periods of structural transition can provide compelling investment opportunities for those applying long-term thinking and leveraging deep sector expertise.

The geopolitical sphere

The world is morphing, with global leadership becoming more fragmented and no single nation or alliance willing or able to set the rules. Trade relationships are being reshaped, national security priorities are expanding and governments are increasingly focused on self-reliance across energy, pharmaceuticals, defence, critical resources and infrastructure.

For investors, this shift matters. It means global growth is likely to remain resilient overall, but far more divergent at a country and sector level. Inflation, interest rates and fiscal pressures may not move in unison. Episodes of volatility from different origins are increasingly a feature of markets. We need to psychologically accept this dynamic from an investment standpoint and look at the potential reward through active decision-making and selectivity.

The Gulf crisis illustrates that the global economy still has a lot of choke points. The disruption of supply chains is not just about price, it is causing governments to make decisions to reduce dependency. This has implications for investment opportunities, shifting manufacturing loss or benefit from one region or country to another.

Asia is the central nervous system to the West: a radical shift for investors

One of the most profound shifts underway is the growing importance of Asia as a critical engine of global growth, innovation and security. Japan, Korea and Taiwan are now central to defence modernisation, digitisation, advanced manufacturing and artificial intelligence (AI) supply chains. As Western nations reshore segments of their industrial base, reliance on North Asia’s industrial and technological expertise is increasing.

China continues its long-term push towards technological self-sufficiency, particularly in AI, biotechnology and advanced manufacturing. While deflation and real estate challenges persist, opportunities arise from consumption trends, homegrown AI and other technologies with pricing power.

Asia is home to a fierce pace of competition and change, driven by entrepreneurial spirit. Importantly, it is a diverse region of economies at the centre of geopolitics, global defence shifts, technology and AI and advanced industrials — all of which the West is increasingly reliant on.

Rethinking the financial industry: from regulation to innovation

The financial industry is undergoing structural change. Tokenisation — which is the digital representation of financial assets, traded on a blockchain network — continues to move into mainstream adoption, improving market efficiency and access over time. In parallel, regulatory reform is reshaping banking systems. In Japan, persistent inflation is driving a gradual, historic shift from cash savings towards investing. In the US, regulatory change is supporting consolidation and improved capital efficiency across the banking sector, with bank mergers being approved at their fastest pace since 1990.

A new age of global energy and infrastructure

Global infrastructure and energy are facing once‑in‑a‑lifetime forces. Data centres, cloud computing and AI deployment have turned reliable energy supply into a strategic constraint for many economies. Ageing power grids, demand for digital infrastructure and the impact of AI are driving what we see as a once-in-a-decade global investment opportunity. Governments cannot fund this alone. Private enterprise and private credit will be essential.

In Australia, the importance of reliable and affordable energy supply remains a defining economic challenge. Renewable energy generation, storage and infrastructure assets are increasingly critical to long-term resilience.

A targeted commodity super cycle

Alongside infrastructure investment, demand for critical minerals is accelerating. This is due to advanced re-industrialisation, years of underinvestment and the emerging national security priorities of the West. Countries are growing strategic reserves of commodities, with the US securing stockpiles of various critical minerals from outside of China. Meanwhile, Australia is also focusing on securing its critical minerals inventory and supply chain. If successful, this could make us a leader in processing (not just mining), creating public and private market opportunities over time.

In understanding the rise in various commodity prices, it is important to distinguish between those that serve as diversification for central banks from financial assets such as bonds and currencies (e.g., gold) and all others that don’t.

A new currency regime

Currency markets are also adjusting. While the US dollar remains central as the world’s reserve currency, its dominance is gradually moderating. We see a more balanced currency landscape emerging, where institutional credibility, innovation, productivity and capital market depth will increasingly determine long-term outcomes. For Australia, this highlights the challenges of an economy that is supply-constrained, with structural inflation drivers.

The global equity landscape: AI’s multi-dimensional opportunity

Despite questions around the peak of the AI investment cycle, we believe we are early in a long-term transformation. Unlike past technology booms, AI investment is being monetised at scale across multiple industries. Opportunity is broadening beyond a small group of technology leaders to materially reshape cost structures, competitive advantages and profitability across a broad range of industry and business beneficiaries including infrastructure providers, energy suppliers, healthcare innovators, advanced manufacturers and select financials.

Generative AI is a multi-year technology cycle. The infrastructure, energy, hardware, cooling, optical connections and semiconductor ecosystems represent over 220 specialised companies and significant opportunity.

Global credit markets: an inflection point

Credit markets are entering a phase of dispersion, with strong businesses attracting capital while over‑leveraged sectors face wider spreads and refinancing pressure. In public markets, all-in yields are increasingly reliant on the path of interest rates to achieve attractive returns. In private markets, industry rationalisation in Australia and explosive capex capital needs in the US will drive durable and attractive opportunities.

Alternative lending markets have reached a new level of maturity in our domestic market, supported by stronger regulatory oversight and improving industry standards. We expect this will trigger a shift to institutional non-bank lenders who have the expertise to structure robust borrowing terms. Globally, private infrastructure debt and asset‑based lending are emerging as compelling opportunities, supporting the large infrastructure funding required for the next phase of industrial modernisation, digitisation and AI-led transformation.

This article references Perspectives – an annual research publication assessing global market events and identifying key investment themes. It is produced for clients of Westpac Private Bank’s Global Investment Services. To learn more or access the full publication, contact your Private Banker or visit westpac.com.au/gis.

About the author  

George Toubia is Chief Investment Officer for Global Investment Services (GIS) within Westpac Private Bank. George identifies themes in global markets as well as identifying, originating, selecting and monitoring conviction in the curated investment opportunities presented to wholesale high net worth investors of GlS. He also leads a team of investment analysts who together form the Private Wealth Investment Team. George is a regular thought leader, sharing his views to help clients allocate capital and navigate changing investment landscapes.