Analysis of Defensive Asset Allocation Strategies Amid Escalating Geopolitical Risks

Based on the latest geopolitical dynamics and market data analysis, the following is an in-depth analysis of the impact of escalating geopolitical risks on defensive asset investment allocation strategies:

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According to the latest intelligence, the Trump administration has submitted a

to Zelensky, which includes NATO-style security guarantee clauses, indicating that the Russia-Ukraine conflict may enter a critical turning point phase [1][2]. However, analysis from the Stimson Center points out that Russia currently holds an advantage on the battlefield, and conventional conflicts last an average of more than a decade unless they transform into frozen conflicts or a ceasefire agreement is reached [2].

The EU has passed a

aid package to Ukraine, which provides a financial foundation for Ukraine’s continued resistance, while also supporting Europe’s strategic autonomy process [1].

According to the Stimson Center’s Top Ten Global Risks Report 2026, the main risks include:

• Russia consolidates its advantages
  : Putin may become more aggressive and less interested in reaching an agreement
• Declining NATO cohesion
  : Differences between the US and Europe on the Ukraine issue may lead to NATO strategic division
• Energy security uncertainty
  : Continued Russian strikes on Ukrainian infrastructure [2]

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:

Indicator	Data
2024-2026 Price Increase	+74.32%
Current Price	$4,436.50/ounce
2025 High	$4,584.00/ounce
200-Day Moving Average	$3,738.63

:

• J.P. Morgan
  : The average price is expected to reach
  $5,055 per ounce
  in Q4 2026, and
  $5,400 per ounce
  in Q4 2027 [3]
• Deutsche Bank
  : The average price is expected to exceed $4,400 per ounce in 2026 [4]

The main drivers of gold’s rise include:

• Persistent
  geopolitical tensions
• Strong
  central bank gold purchase demand
  (official reserve diversification)
• Expectations of Fed interest rate cuts
  reduce the opportunity cost of holding gold
• Declining demand for the US dollar
  [3][4]

:

Indicator	Data
2024-2026 Price Decline	-23.94%
Current Price	$57.12/barrel
Volatility (Daily Standard Deviation)	1.94%
200-Day Moving Average	$62.25

According to analysis from Wood Mackenzie and Reuters,

:

• Global liquid supply growth is expected to reach
  2.5 million barrels per day
  , while demand growth will only be
  0.7 million barrels per day
  [5]
• The average price of Brent crude is expected to be
  $59 per barrel
  in 2026, $10 lower than in 2025 [5]
• OPEC+ is suppressing non-OPEC supply growth by pushing down prices

:

• Tensions between the US and Venezuela may trigger supply disruptions
• Discussions of the US acquiring Greenland have intensified geopolitical uncertainty
• Continued strikes on energy infrastructure amid the Russia-Ukraine conflict [6]

:

Indicator	Data
Current Price	$496.87
2024-2026 Price Decline	-10.65%
Beta Coefficient	0.24 (low correlation with S&P 500)
20-Day Moving Average	$484.67
Technical Trend	Sideways consolidation (range of $484.67-$503.38)

: Since December 2025, defensive stocks have rebounded by more than , and discussions of the US acquiring Greenland have also provided support for defense stocks [6].

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Asset Class	Allocation Recommendation	Adjustment Range	Key Rationale
Gold	Increase Holdings	+15%	Safe-haven demand, central bank purchases, expectations of weaker US dollar
Treasury Bonds	Increase Holdings	+10%	Safe-haven attributes, attractive yields
Military Industry	Selectively Increase Holdings	+5%	Geopolitical risk premium, defense budget uncertainty
Energy	Neutral/Reduce Holdings	-5%	Oversupply concerns, but need to guard against supply disruptions
Cash	Maintain Liquidity	0%	Hedge against market volatility, provide operational flexibility

• Core Allocation
  : It is recommended to allocate
  10-15%
  of the portfolio to gold assets
• Investment Forms
  : Physical gold, gold ETFs, and gold mining stocks are all viable options
• Entry Timing
  : Consider adding positions when the gold price pulls back to around the 200-day moving average (approximately $3,738)
• Target Price
  : According to J.P. Morgan’s forecast, the medium-term target is $5,000 per ounce [3]

• Cautious Stance
  : Given the oversupply fundamentals,
  reduce holdings
  of crude oil-related exposures
• Risk Hedging
  : Retain a small number of long oil positions to hedge against geopolitical supply disruption risks
• Key Focus Areas
  : OPEC+ production decisions, changes in US policies towards Venezuela/Iran

• Selective Allocation
  : Focus on targets with the following characteristics:
  • Companies benefiting from
    defense budget growth
  • Companies with technological advantages in
    drone, missile defense, and cybersecurity
    fields
• Risk Warning
  : Need to pay attention to short-term volatility that may be caused by the progress of peace negotiations

• US Treasury Bonds
  : Perform steadily during market turmoil and can serve as a portfolio stabilizer
• Investment-Grade Bonds
  : Provide relatively safe yields
• Maturity Allocation
  : It is recommended to allocate to medium- and short-term treasury bonds to balance returns and liquidity

1. Diversification
   : Avoid excessive concentration in a single asset class
2. Dynamic Adjustment
   : Timely adjust exposures based on the progress of peace negotiations
3. Stop-Loss Mechanism
   : Set clear stop-loss levels to control downside risks
4. Liquidity Management
   : Maintain sufficient cash reserves to cope with severe market volatility

---

• Gold
  : May fall by 5-10% (decline in safe-haven demand)
• Energy
  : Short-term rebound (eased supply chain concerns), but oversupply fundamentals limit gains
• Military Industry
  : Under pressure (decline in defense budget expectations)

• Gold
  : Continue to rise (safe-haven demand + central bank gold purchases)
• Energy
  : Increased volatility, rising risk premium for supply disruptions
• Military Industry
  : Benefit from expected increases in defense spending

• Gold
  : Moderate rise (persistent uncertainty)
• Energy
  : Price stabilizes, ranges trading
• Military Industry
  : Stable orders, steady stock prices

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Amid the backdrop of escalating geopolitical risks, gold’s position as a traditional safe-haven asset has been strengthened, and institutional forecasts indicate that it still has upside potential. The energy sector needs to be vigilant against oversupply risks, but geopolitical events may lead to severe short-term volatility. The military industry sector can serve as a tool to hedge against geopolitical risks, but close attention should be paid to the progress of peace negotiations.

: Adopt the allocation strategy of , while maintaining the ability to adjust flexibly in response to changes in geopolitical situations.

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[1] Russia Analytical Report, Dec. 22, 2025–Jan. 5, 2026 (https://www.russiamatters.org/news/russia-analytical-report/russia-analytical-report-dec-22-2025-jan-5-2026)

[2] Top Ten Global Risks for 2026 - Stimson Center (https://www.stimson.org/2026/top-ten-global-risks-for-2026/)

[3] Gold price predictions from J.P. Morgan Global Research (https://www.jpmorgan.com/insights/global-research/commodities/gold-prices)

[4] Gold’s Momentum Extends Into 2026 - US Gold Bureau (https://www.usgoldbureau.com/news/post/golds-momentum-extends-into-2026-why-physical-gold-remains-a-compelling-investment)

[5] Five energy market trends to track in 2026 - Reuters (https://www.reuters.com/markets/commodities/five-energy-market-trends-track-2026-year-glut-2025-12-29/)

[6] Crude Oil Outlook: Supply Risks vs Geopolitics - Forex.com (https://www.forex.com/en-us/news-and-analysis/crude-oil-outlook-supply-risks-vs-geopolitics/)

[7] Five themes shaping the energy world 2026 - Wood Mackenzie (https://www.woodmac.com/blogs/the-edge/five-themes-shaping-the-energy-world-2026/)

[8] Trump administration’s 28-point Ukraine-Russia peace plan - ABC News (https://abcnews.go.com/International/trump-administrations-28-point-ukraine-russia-peace-plan/story?id=127735249)