By Amit Kapoor with inputs from Meenakshi Ajith
In the global marketplace, conflict is not an anomaly but a recognised and actively managed risk that is modelled, hedged, and in some cases absorbed directly into economic expectations. Peace, by contrast, behaves less like a traded asset and more like a residual condition: desirable, but structurally under-incentivised. The value proposition is unimpeachable: stability, prosperity, the absence of death. Yet in the modern geopolitical marketplace, peace is chronically underperforming and outcompeted by conflict.
This is not because markets are indifferent to peace. Markets understand perfectly well what peace is worth. The problem is not therefore that peace lacks a price, but that peace lacks a constituency. There is no organised, institutionalised industry whose core function is to produce and sustain it at scale.
The structural imbalance is not just theatrical and nowhere is this asymmetry more visible than in the Strait of Hormuz today. Oil prices have risen nearly 60% since the war began. The International Energy Agency has described the disruption as the largest oil supply shock in the history of the global market. The situation offers only two plausible outcomes which are genuine extremes and not gradations. If Iran is reintegrated into the international community, its oil returns, prices fall, and a post-conflict region begins rebuilding. In the other, conflict hardens into years of compromised energy flows and a global economy grinding towards recession.
The range of outcomes is narrow and skewed towards these extremes rather than any stable middle ground. The stagflationary impact would alter everything from central bank trajectories to electoral outcomes across the developed world. What appears as “managed uncertainty” is, in practice, a slow drift towards the more damaging equilibrium.
The scale of damage is not hidden from anyone paying attention: growth forecasts cut, food shortages spreading across the Gulf, and the world’s most critical energy waterway reduced to a trickle. The question is not why conflict is costly because everyone can see that it is. The question is why the world remains so much better organised to produce conflict than to prevent it. The answer lies less in human nature than in competitive structure.
Michael Porter and Katherine Gehl showed that political systems function as industries, with competitors, suppliers, customers, and, crucially, structural barriers that determine who can enter the market and on what terms. In most industries, these rules are shaped by regulators. In politics, they are shaped by the competitors themselves. Free from independent constraint, incumbents design systems that entrench their own position. What makes this framework so useful is that it shifts the diagnosis away from individuals and intentions. The problem is much more than just bad actors or corrupt politicians. Most of the people inside these systems are doing exactly what the system rewards them for doing.
Applied to the global security order, this logic becomes difficult to ignore. What we call the international conflict complex, spanning defence industries, arms exporters, intelligence establishments, and the political systems that fund and depend upon them functions like a deeply entrenched industry. Its incumbents have every structural incentive to manage conflict rather than resolve it, because resolution removes the very condition that justifies their budgets, their influence, and their political weight. Peace is not simply underfunded or diplomatically neglected. In Porter’s terms, it is a product trying to enter a market where the dominant incumbent writes the rules of entry, controls the channels of distribution, and faces no meaningful external regulation.
The idea that conflict fuels growth and job creation in some industries is not just morally questionable, but it is empirically wrong. According to the 2025 Global Peace Index, the economic impact of violence on the global economy in 2024 was $19.97 trillion in purchasing power parity (PPP) terms. This figure is equivalent to 11.6% of the world’s economic activity or $2,446 per person. Military and internal security expenditure accounts for over 74% of the figure, with the impact of military spending alone accounting for $9 trillion in PPP terms the past year.
The deepest irony is that peace is not the weaker product. By almost every measure that markets claim to care about, it is the stronger one. It expands trade, compounds investment returns, frees labour for productive use, and generates the stable demand that businesses and economies are actually built on. A world organised around peace would be structurally wealthier, more innovative and more resilient than the one we currently inhabit.
A durable peace, however, in today’s world requires ceasefires, verification mechanisms, credible deterrence, political recognition, domestic legitimacy, and often a carefully constructed narrative that allows each side to claim it has not lost. Remove any one element and the arrangement can unravel. This makes peace unusually hard to transact. In most markets, buyers and sellers agree on what is being exchanged, but in geopolitics, they often do not. The current tensions between the US and Iran illustrate the point. One side seeks constraints on military capability and regional influence while the other demands security guarantees, compensation, and recognition of its strategic interests. These are not different prices for the same good. They are different goods altogether.
Even if the contours of an agreement can somehow be sketched, there is also the need for credibility and commitment. Peace requires commitments that endure beyond the moment of signing. However, in today’s world, power shifts, governments change, and incentives evolve rapidly. Each side worries that today’s compromise will become tomorrow’s vulnerability. This results in a classic commitment problem. Agreements that would make both parties better off in principle become impossible in practice because neither can be sure the other will keep its word. All of these constraints point to why peace fails to clear the market, though its benefits are invaluable. In the current geopolitical landscape, peace is not merely undervalued, but has become structurally difficult to specify, negotiate, and enforce within a system whose incentives are organised around conflict.
The article was published with Financial Express on April 9, 2026.
