Geopolitical Risk and Emerging Market Exposure: The Trump-Al-Sharaa Meeting and Its Implications for U.S. Policy and Asset Flows

The September 2025 meeting between former U.S. President Donald Trump and Syria's interim leader Ahmed al-Sharaa at the United Nations General Assembly (UNGA) marks a pivotal moment in U.S. foreign policy and global asset allocation. This diplomatic overture, following Trump's May 2025 announcement to lift U.S. sanctions on Syria, signals a recalibration of American influence in the Middle East and could reshape investment dynamics in emerging markets. For investors, the interplay between geopolitical risk and asset flows has never been more critical, as regional realignments and policy shifts create both opportunities and uncertainties.

Geopolitical Realignment and U.S. Policy Shift

Trump's decision to terminate the Syria Sanctions Program via Executive Order 14312 in June 2025United States Terminates Syria Sanctions Program^[5] was not merely an economic gesture but a strategic recalibration. By removing sanctions on 518 entities and individuals, the U.S. sought to position Syria as a counterweight to Iranian influence, aligning with regional actors like Saudi Arabia and TurkeySyria at the Crossroads: New ESCWA-UNCTAD Report Warns of Economic Ruin^[2]. This move reflects a broader pivot toward “friend-shoring,” where geopolitical alignment increasingly dictates investment flowsInvesting in friends: The role of geopolitical alignment in FDI flows^[4]. For instance, the UAE's $800 million investment in Syria's Tartus port and France's $260 million commitment to Latakia underscore how regional powers are capitalizing on U.S. policy shifts to secure economic and strategic footholdsSyria’s New Era: Economic Recovery Begins After Assad’s Fall and War^[3].

However, the U.S. has not fully relinquished leverage. Trump's conditions—normalizing ties with Israel via the Abraham Accords, expelling foreign fighters, and managing Islamic State detention facilities—impose political and security contingencies on Syria's reintegrationSyria at the Crossroads: New ESCWA-UNCTAD Report Warns of Economic Ruin^[2]. These demands highlight the fragility of the new equilibrium, as Syria's government must balance U.S. expectations with domestic stability and regional rivalries.

Economic Implications for Syria and Emerging Markets

The lifting of sanctions has already triggered early signs of economic revival. The Syrian pound strengthened against the U.S. dollar, and sectors like energy and infrastructure have attracted foreign interestSyria’s New Era: Economic Recovery Begins After Assad’s Fall and War^[3]. Yet, the World Bank notes that Syria's GDP is still less than half its prewar level, with 90% of the population living in povertySyria’s New Era: Economic Recovery Begins After Assad’s Fall and War^[3]. While the U.S. and EU sanctions relief could catalyze growth, challenges such as liquidity constraints ($200 million in cash reserves) and unresolved humanitarian crises persistSyria’s New Era: Economic Recovery Begins After Assad’s Fall and War^[3].

For emerging markets, Syria's reintegration offers a case study in post-sanctions recovery. The United Nations Development Programme (UNDP) estimates that Syria's economy will not return to pre-conflict levels before 2080 at current growth ratesSyria at the Crossroads: New ESCWA-UNCTAD Report Warns of Economic Ruin^[2], underscoring the long-term nature of such transitions. Investors must weigh short-term optimism against structural risks, including governance reforms and sectarian tensions.

Asset Flows and Geopolitical Risk

The geopolitical risk index (GPR) has historically predicted capital flow volatility, and the Trump-al-Sharaa meeting could amplify this dynamic. As of September 2025, the GPR indicates heightened uncertainty due to Middle East tensions and shifting alliancesGeopolitical risk and the dynamics of international capital flows^[1]. Investors are likely to respond with a “flight home” effect, favoring U.S. and allied markets over riskier emerging assetsSyria’s New Era: Economic Recovery Begins After Assad’s Fall and War^[3]. However, the U.S. dollar's dominance remains unchallenged, with the RMB's role in trade finance confined to China-aligned blocsGeopolitical risk and the dynamics of international capital flows^[1].

The meeting's impact on asset flows will hinge on its success in stabilizing Syria. If al-Sharaa meets U.S. conditions, capital could flow into Syrian infrastructure and energy projects. Conversely, setbacks—such as renewed conflict or failure to normalize ties with Israel—could trigger a reversal of investment. Regional investors, particularly from Gulf states, are already positioning themselves to capitalize on this ambiguitySyria at the Crossroads: New ESCWA-UNCTAD Report Warns of Economic Ruin^[2].

Conclusion and Outlook

The Trump-al-Sharaa meeting represents more than a diplomatic gesture; it is a recalibration of U.S. strategy in a multipolar world. For investors, the key takeaway is the growing interdependence between geopolitical alignment and asset allocation. While Syria's reintegration offers long-term opportunities, the path is fraught with risks. Emerging markets must navigate a landscape where policy shifts, regional rivalries, and sanctions relief create both volatility and potential.