The world is shaking off the effects of the 2008 financial meltdown and the key risks to the investment climate in 2014 will be geopolitical, according to research firm the Eurasia Group.

Its annual report on the most challenging political and geopolitical stress points for global investors and market participants in 2014  highlights risk factors such as U.S. leadership, emerging markets and Middle East politics.

The U.S. is the world’s only remaining superpower and how it defines its global role could set the tone for investors for the year, the Eurasia Group report says.

That’s why America’s troubled relationship with its allies is the first risk listed in the report, according to David Gordon, head of research for Eurasia Group.

'The U.S. role as a kind of provider of security in a lot of the world is often taken for granted. Now that it’s not there, the world is going to look back and like the days when the U.S. was willing to play a more active role in a wider range of places'- Eurasia Group's David Gordon

“Our view is that really, beginning with the Syria crisis last summer and then continuing for most of the rest of the year, President Obama and the U.S. were seen as being inconsistent and not necessarily reliable by many American allies,” Gordon said in an interview with CBC’s Lang & O’Leary Exchange.

For countries such as Canada and Mexico,  with economies integrated with the U.S., there are few options but to continue on that course, he said.

“But for some countries, particularly for Saudi Arabia, for Turkey, for Indonesia — these countries are likely to really question the viability and the strength of their historic ties to the U.S.  That’s really the essence of the challenge here,” Gordon said.

Edward Snowden’s revelations of spying have soured previously strong relationships and there is a perception that the U.S. is focused on domestic issues, such as Obamacare, to the detriment of foreign policy, he said.

If there is a vacuum in U.S. foreign policy leadership, other countries could act on their own, Gordon  said. He gave the example of Saudi Arabia, which could bolster its ties to Sunni causes that make people in the West uncomfortable.  

“The implication here is that it is harder to get some good things done, like the Trans Pacific Partnership  it may be harder to close a [nuclear] deal with Iran,” he said.

“The U.S. role as a kind of provider of security in a lot of parts of the world is often taken for granted. Now that it’s not there, the world is going to look back and like the days when the U.S. was willing to play a more active role in a wider range of places.”

He also pointed to upcoming elections connected with some emerging markets – saying a change of government in countries such as Turkey, Indonesia, Colombia, Brazil and South Africa – could have longer-term effects on the health of markets.

The recent good years for emerging markets have led to  complacency by incumbent governments and that could mean change ahead, Gordon said.

“We’re looking at elections as becoming a defining point in a much more divergent pathway among the emerging markets with some have very stable and responsive policies and others much less so. The good news is in Colombia and Brazil, the outlook is quite favourable,” he said.

Eurasia Group’s other top risk points:

  • China:  which is balancing its economy against environmental concerns amid a newly reformist political climate 
  • Iran: which is negotiating a nuclear deal and could return to oil markets.
  • The petrostates: which face political pressures, as oil prices drop.
  • Strategic data, an ongoing public issue of  its control by states or corporations.
  • Al Qaeda 2.0, the growth of new radicalism out of the Arab Spring.
  • The Middle East’s expanding unrest
  • The capricious Kremlin

The group is also predicting oil prices could drop to the $80 a barrel range, which could hurt the Canadian economy.

If an Iran nuclear deal  happens, “it has security benefits, but it will definitely put downward pressure on energy prices and could potentially increase the competition between Canada and the U.S. as producers of energy and make price a competitive element in that relationship,” Gordon said.