The US-Iran conflict is just a microcosm: Four hundred years of history tell you how finance counters geopolitics.
2026-06-17 21:41:52
Since the formation of the modern European state system four hundred years ago, the international financial system has always been dependent on a larger international order framework.
This international order has undergone several major reshapings, and each change has profoundly reshaped the global economic and financial landscape.
Looking back at Europe's past, it is not difficult to see that each round of dramatic changes in the global landscape has not only defined the financial ecosystem at that time, but also brought profound insights to the current situation: the stability of the financial system can never exist independently, but is deeply tied to the global international order.
We should learn from past experiences and plan ahead for future risks and development.
To understand the current state of global finance, we first need to trace the complete historical context.
Historical Context: The Evolution of Finance under Four Major Geopolitical Orders
After decades of continuous warfare, the Peace of Westphalia was signed in 1648, attempting to stabilize the European situation by establishing two major principles: national sovereignty and non-interference in internal affairs.
This was the first time the West had attempted to constrain the competitive behavior of major powers with neutral rules , but due to the lack of effective enforcement mechanisms and dispute resolution channels, it ultimately failed to maintain lasting peace and economic prosperity.
At that time, mercantilism dominated the global economy, the international financial system was highly fragmented, and each country prioritized its own interests and self-preservation.
The European Harmony System (1814–1913), which emerged after the end of the Napoleonic Wars, achieved even more lasting results.
This collaborative mechanism, jointly led by major powers and centered on maintaining a balance of power, laid a solid foundation for the first round of modern globalization.
With a significant drop in transportation costs and innovation in communication technology, capital and goods have achieved unprecedented cross-border circulation, leading to the formation of a truly international financial system.
During this period, the financial market was generally open, cross-border capital was efficiently allocated, and global long-term economic prosperity was continuously driven.
However, at the beginning of the 20th century, the geopolitical situation deteriorated rapidly, territorial disputes continued to intensify, and industrial policies with mercantilist characteristics further fueled the arms race among countries.
The outbreak of World War I had a devastating impact on financial markets—even though geopolitical tensions had been building for some time, the markets were still not adequately prepared, and the stock exchanges in the UK and the US were forced to close for months.
During the two World Wars, bond and stock prices both suffered sharp declines. The global financial crisis and Great Depression that followed the wars further fueled trade protectionism and encouraged the rise of extreme ideologies.
Furthermore, the failure of key powers to participate and the inability of the international alliance to counterbalance the conflict ultimately prevented an even larger-scale disaster from occurring.
World War II completely reshaped the global landscape, giving rise to a brand-new international order.
The Treaty of San Francisco and the Bretton Woods system ushered in an unprecedented period of stability and prosperity, with countries proactively abandoning short-term zero-sum confrontational thinking and turning to seeking long-term cooperation and win-win outcomes.
Even amidst the backdrop of Cold War confrontation, global financial and economic integration has reached new heights.
The core logic of this order lies in multilateral participation and mutual benefit, allowing almost all participating countries to share the dividends of development.
History has also shown that the financial system is not simply passively shaped by geopolitics, but can also play a reverse role and actively influence the geopolitical landscape.
A mature and well-developed financial system can serve national strategic needs. A typical example is the British government bond market, which played a key role in restraining the expansion of Napoleon's power.
Conversely, the absence of a global financial cooperation mechanism between the two wars significantly exacerbated subsequent geopolitical instability.
After the end of the Cold War, the world entered a period of peace and prosperity, and concerns about strategic confrontation between countries were temporarily relegated to a secondary position.
Financial market risk premiums have remained low for a long time, capital flows freely around the world, and interdependence among economies has become a core advantage of the system.
This history fully demonstrates that when the international order is stable and orderly, financial globalization can fully unleash its operational efficiency and create inclusive common prosperity.
The long historical process provides a clear reference for global financial governance today.
Geopolitical risks are not a new variable; they have always affected the establishment of cross-border payment systems, the stable operation of financial markets, and the risk resistance capabilities of various institutions.
Historically, every geopolitical conflict has triggered supply chain disruptions, energy supply and demand crises, and significant market volatility, with subsequent recovery periods being lengthy.
This serves as a wake-up call: in a phase of escalating geopolitical uncertainty, the financial system urgently needs to strengthen the resilience of its core infrastructure, improve its crisis management mechanisms, and deepen transnational policy coordination.
Historical patterns are clear: when major powers cooperate and international rules are effectively implemented, financial globalization can benefit all parties; once the system becomes fragmented and conflicts occur frequently, various financial risks will be magnified many times over.
Outward-oriented and open economies such as Australia are making pragmatic arrangements by relying on multilateral platforms such as the Financial Supervisory Council to improve the continuity of payment systems, unify risk management frameworks, and promote public-private sector collaboration. This is a result of drawing on historical experience.
Ultimately, history gives us the core conclusion that the resilience of the financial system is built upon a comprehensive understanding of the global geopolitical order.
Geopolitical security is a prerequisite for financial stability. Early geopolitical conflicts often directly and devastatingly impact the financial system. Without a stable geopolitical environment, the globalized financial system cannot survive.
As global economic integration continues to deepen and financial markets in various countries become more intertwined, the interaction between the two has undergone a fundamental reversal: geopolitical situations no longer unilaterally determine the direction of finance, and financial instruments have instead evolved into the core means of geopolitical games, capable of both inducing geopolitical conflicts and, conversely, constraining and restraining the development of geopolitical situations.
Taking the current geopolitical friction between the US and Iran as an example, the conflict directly triggered a global energy supply crisis, and the market's dollar liquidity tightened rapidly, resulting in a dollar shortage. In order to cope with the funding pressure, countries were forced to sell US Treasury bonds, further pushing up the yield of US Treasury bonds and significantly increasing the borrowing cost of the US federal government, which continued to worsen its already severe debt risk.
At the same time, global economic growth is under pressure, the US is showing a K-shaped recovery pattern with divergence, and the economic conditions of ordinary people continue to weaken, fully demonstrating that in the highly interconnected modern financial landscape, no country can remain unaffected by the chain reaction of geopolitical and financial shocks.
This international order has undergone several major reshapings, and each change has profoundly reshaped the global economic and financial landscape.
Looking back at Europe's past, it is not difficult to see that each round of dramatic changes in the global landscape has not only defined the financial ecosystem at that time, but also brought profound insights to the current situation: the stability of the financial system can never exist independently, but is deeply tied to the global international order.
We should learn from past experiences and plan ahead for future risks and development.
To understand the current state of global finance, we first need to trace the complete historical context.
Historical Context: The Evolution of Finance under Four Major Geopolitical Orders
The Westphalian System: A Fragmented Early Financial Landscape
After decades of continuous warfare, the Peace of Westphalia was signed in 1648, attempting to stabilize the European situation by establishing two major principles: national sovereignty and non-interference in internal affairs.
This was the first time the West had attempted to constrain the competitive behavior of major powers with neutral rules , but due to the lack of effective enforcement mechanisms and dispute resolution channels, it ultimately failed to maintain lasting peace and economic prosperity.
At that time, mercantilism dominated the global economy, the international financial system was highly fragmented, and each country prioritized its own interests and self-preservation.
European Harmonization System: The Birth of the First Global Financial System
The European Harmony System (1814–1913), which emerged after the end of the Napoleonic Wars, achieved even more lasting results.
This collaborative mechanism, jointly led by major powers and centered on maintaining a balance of power, laid a solid foundation for the first round of modern globalization.
With a significant drop in transportation costs and innovation in communication technology, capital and goods have achieved unprecedented cross-border circulation, leading to the formation of a truly international financial system.
During this period, the financial market was generally open, cross-border capital was efficiently allocated, and global long-term economic prosperity was continuously driven.
Two World Wars and the Great Depression: The Collapse of Order Triggers Financial Catastrophe
However, at the beginning of the 20th century, the geopolitical situation deteriorated rapidly, territorial disputes continued to intensify, and industrial policies with mercantilist characteristics further fueled the arms race among countries.
The outbreak of World War I had a devastating impact on financial markets—even though geopolitical tensions had been building for some time, the markets were still not adequately prepared, and the stock exchanges in the UK and the US were forced to close for months.
During the two World Wars, bond and stock prices both suffered sharp declines. The global financial crisis and Great Depression that followed the wars further fueled trade protectionism and encouraged the rise of extreme ideologies.
Furthermore, the failure of key powers to participate and the inability of the international alliance to counterbalance the conflict ultimately prevented an even larger-scale disaster from occurring.
Bretton Woods System: Multilateral Cooperation Drives Financial Integration
World War II completely reshaped the global landscape, giving rise to a brand-new international order.
The Treaty of San Francisco and the Bretton Woods system ushered in an unprecedented period of stability and prosperity, with countries proactively abandoning short-term zero-sum confrontational thinking and turning to seeking long-term cooperation and win-win outcomes.
Even amidst the backdrop of Cold War confrontation, global financial and economic integration has reached new heights.
The core logic of this order lies in multilateral participation and mutual benefit, allowing almost all participating countries to share the dividends of development.
A two-way relationship: geopolitics shapes finance, and finance, in turn, influences the geopolitical landscape.
History has also shown that the financial system is not simply passively shaped by geopolitics, but can also play a reverse role and actively influence the geopolitical landscape.
A mature and well-developed financial system can serve national strategic needs. A typical example is the British government bond market, which played a key role in restraining the expansion of Napoleon's power.
Conversely, the absence of a global financial cooperation mechanism between the two wars significantly exacerbated subsequent geopolitical instability.
After the end of the Cold War, the world entered a period of peace and prosperity, and concerns about strategic confrontation between countries were temporarily relegated to a secondary position.
Financial market risk premiums have remained low for a long time, capital flows freely around the world, and interdependence among economies has become a core advantage of the system.
This history fully demonstrates that when the international order is stable and orderly, financial globalization can fully unleash its operational efficiency and create inclusive common prosperity.
Historical Lessons: Implications for the Contemporary Global Financial System
The long historical process provides a clear reference for global financial governance today.
Geopolitical risks are not a new variable; they have always affected the establishment of cross-border payment systems, the stable operation of financial markets, and the risk resistance capabilities of various institutions.
Historically, every geopolitical conflict has triggered supply chain disruptions, energy supply and demand crises, and significant market volatility, with subsequent recovery periods being lengthy.
This serves as a wake-up call: in a phase of escalating geopolitical uncertainty, the financial system urgently needs to strengthen the resilience of its core infrastructure, improve its crisis management mechanisms, and deepen transnational policy coordination.
Historical patterns are clear: when major powers cooperate and international rules are effectively implemented, financial globalization can benefit all parties; once the system becomes fragmented and conflicts occur frequently, various financial risks will be magnified many times over.
Outward-oriented and open economies such as Australia are making pragmatic arrangements by relying on multilateral platforms such as the Financial Supervisory Council to improve the continuity of payment systems, unify risk management frameworks, and promote public-private sector collaboration. This is a result of drawing on historical experience.
In conclusion: Learn from history and build a financial system with long-term resilience.
Ultimately, history gives us the core conclusion that the resilience of the financial system is built upon a comprehensive understanding of the global geopolitical order.
Geopolitical security is a prerequisite for financial stability. Early geopolitical conflicts often directly and devastatingly impact the financial system. Without a stable geopolitical environment, the globalized financial system cannot survive.
As global economic integration continues to deepen and financial markets in various countries become more intertwined, the interaction between the two has undergone a fundamental reversal: geopolitical situations no longer unilaterally determine the direction of finance, and financial instruments have instead evolved into the core means of geopolitical games, capable of both inducing geopolitical conflicts and, conversely, constraining and restraining the development of geopolitical situations.
Taking the current geopolitical friction between the US and Iran as an example, the conflict directly triggered a global energy supply crisis, and the market's dollar liquidity tightened rapidly, resulting in a dollar shortage. In order to cope with the funding pressure, countries were forced to sell US Treasury bonds, further pushing up the yield of US Treasury bonds and significantly increasing the borrowing cost of the US federal government, which continued to worsen its already severe debt risk.
At the same time, global economic growth is under pressure, the US is showing a K-shaped recovery pattern with divergence, and the economic conditions of ordinary people continue to weaken, fully demonstrating that in the highly interconnected modern financial landscape, no country can remain unaffected by the chain reaction of geopolitical and financial shocks.
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