The Rise of the "Axis of Upheaval" and Its Implications for Global Equities

The geopolitical landscape in 2025 is defined by the accelerating consolidation of the "Axis of Upheaval"—a loose but increasingly influential coalition of China, Russia, Iran, and North Korea. This alignment, driven by shared opposition to the U.S.-led international order, has profound implications for global equities, reshaping investment risks and opportunities. While the group’s military and economic cooperation signals a challenge to Western dominance, internal frictions and divergent strategic priorities suggest it remains a fragmented, transactional bloc rather than a monolithic force.

Geopolitical Dynamics and Military Integration

The Axis of Upheaval’s military collaboration has deepened in recent years. Russia’s invasion of Ukraine has served as a catalyst, with battlefield lessons and technology—such as Iran’s drone systems—being shared across the group [1]. North Korea’s deployment of thousands of soldiers to Russia and China’s provision of dual-use technology further illustrate the strategic interdependence [4]. However, this cooperation is not without limits. During the 12-day Israel-Iran conflict in 2025, neither China nor Russia provided direct support to Tehran, underscoring the fragility of the alliance when individual interests clash [4].

From an investment perspective, this hybrid of cooperation and competition creates both risks and opportunities. The Axis’s military integration could destabilize regional security, prompting increased defense spending in rival nations like South Korea and Japan, which have raised their budgets by 12-15% [3]. Conversely, the lack of a unified military strategy may limit the Axis’s ability to project power cohesively, reducing the likelihood of a large-scale, coordinated conflict.

Economic Resilience and De-Dollarization

Economically, the Axis has leveraged its alignment to circumvent Western sanctions and reduce reliance on the U.S. dollar. China, for instance, purchases 90% of Iran’s oil and nearly half of Russia’s, with transactions increasingly conducted in yuan and rubles [5]. This de-dollarization trend, accelerated by the Shanghai Cooperation Organization (SCO), is reshaping global trade corridors and weakening the efficacy of Western financial tools [6]. The SCO’s initiatives, such as the Power of Siberia 1 pipeline and digital infrastructure partnerships, are also attracting investor interest in emerging markets [6].

However, the economic benefits of the Axis are uneven. While China and Russia have institutionalized their cooperation through the SCO, relationships like China-Iran remain transactional, driven by energy needs rather than strategic alignment [6]. This asymmetry could create volatility in supply chains and trade flows, particularly in sectors like rare earth materials and critical minerals [2].

Investment Risks and Opportunities

For global equities, the Axis of Upheaval presents a dual-edged sword. On one hand, the group’s alignment has spurred a shift toward localized economic governance and protectionist policies, fragmenting global markets [6]. U.S. trade policies under the Trump administration, including bilateral tariffs and trade deals, are further realigning investment flows, with small-state financial centers benefiting from their regulatory flexibility [3].

On the other hand, the Axis’s push for de-dollarization and digital sovereignty opens opportunities in sectors like cybersecurity, AI-driven military technology, and critical minerals [3]. Investors are increasingly hedging against volatility by allocating to gold, Treasuries, and defense-related equities [3]. Meanwhile, emerging market equities—particularly in China and Russia—are outperforming due to their integration into the SCO’s economic framework [6].

Strategic Implications for Investors

The U.S.-China technological rivalry remains a central variable for global stability. As both sides form technological blocs, investors must navigate restrictions on collaboration in AI, quantum computing, and semiconductors [1]. This fragmentation could slow innovation but also create niche opportunities for firms specializing in digital sovereignty solutions.

For authoritarian-leaning blocs, the risks of over-reliance on the Axis are significant. Cyber warfare, misinformation campaigns, and resource-driven conflicts—exacerbated by climate change—pose persistent threats [2]. Conversely, the Axis’s ability to withstand Western sanctions and diversify trade partners offers resilience in a multipolar world.

Conclusion

The Axis of Upheaval is a defining feature of 2025’s geopolitical and economic landscape. While its military and economic alignment challenges the U.S.-led order, its internal divisions and transactional nature limit its potential as a unified force. For investors, the key lies in balancing the risks of fragmentation and volatility with the opportunities in emerging markets, digital infrastructure, and defense sectors. As the global order continues to shift, scenario-based planning and flexible strategies will be critical to navigating this complex terrain.

Source:
[1] The Axis of Upheaval [https://www.cnas.org/publications/reports/the-axis-of-upheaval]
[2] Global Risks 2025: A world of growing divisions [https://www.weforum.org/publications/global-risks-report-2025/in-full/global-risks-2025-a-world-of-growing-divisions-c943fe3ba0/]
[3] Trends Shaping Global Events, Trade, and Investment in 2025 [https://www.mourant.com/news-and-views/news-2025/5-for-25--trends-shaping-global-events--trade--and-investment-in-2025.aspx]
[4] CRINK: The Strategic Limits of the New “Axis of Upheaval” [https://www.steptoe.com/en/news-publications/stepwise-risk-outlook/crink-the-strategic-limits-of-the-new-axis-of-upheaval.html]
[5] Defying West, China's Xi gathers "Axis of Upheaval" at military parade [https://www.reuters.com/business/aerospace-defense/defying-west-chinas-xi-gathers-axis-upheaval-military-parade-2025-08-28/]
[6] The Rise of the Beijing-Russia Axis: Strategic Implications for Emerging Market Equities [https://www.ainvest.com/news/rise-beijing-russia-axis-strategic-implications-emerging-market-equities-2508/]