What Is The Global Peace Index And Why Does It Matter To Financial Markets?

image from https://www.economicsandpeace.org/

The Global Peace Index (GPI) is widely regarded as “the world’s leading measure of global peacefulness.” Compiled annually since 2007 by the Institute for Economics and Peace (IEP), a non-partisan think tank, it ranks countries and territories based on levels of peace, covering 99.7% of the global population.

Peace in this context means Negative Peace, the absence of violence or fear of violence. Although the GPI also analyses Positive Peace, which encompasses the structures and attitudes that sustain peace.

The initiative was spearheaded by Steve Killelea, an Australian tech entrepreneur and philanthropist. Killelea founded the IEP, which produces the GPI, aiming to shift global focus toward viewing peace as a tangible, positive, and economically meaningful asset.

What Does The Global Peace Index Measure?

The GPI measures many factors. Let’s look at them and show you some real world examples of the peace index in action.

a. Indicators & Domains

The GPI uses 23 indicators grouped into three domains:

1. Societal Safety & Security
2. Ongoing Domestic & International Conflict
3. Degree of Militarisation

These indicators include data such as homicide rates, military expenditure (as % of GDP), battle-related deaths, levels of political terror, refugee populations, and others, aggregated and weighted into a composite score.

b. Additional Concepts

• Negative Peace: Absence of violence or fear thereof, core to GPI’s ranking.
• Positive Peace: The attitudes, institutions, and structures (like a well-functioning government, acceptable distribution, human capital, freedom of information, low corruption) that sustain peace.

Global Trends in 2024–2025

• In 2024, global peacefulness deteriorated by 0.56%, with 97 countries becoming less peaceful — marking the largest deterioration year since the index began.
• The number of active conflicts reached 56, the highest since WWII, with both militarisation and conflict trends increasing significantly.
• In 2025, the decline continued. Global peacefulness dropped by 0.36%, with 59 active state-based conflicts. That is the most since WWII. Resolution of conflicts has decreased significantly; countries ending conflicts decisively or through peace agreements fell dramatically.
• The economic cost of violence was eye-opening, estimated at $20 trillion in PPP terms, equivalent to 11.6% of global GDP, with military expenditures alone accounting for $9 trillion (about 45%).
• The most peaceful countries included Iceland, Ireland, New Zealand, Finland, Austria, and Singapore, featuring in the top rankings across the 2025 GPI.
• The United States, by contrast, ranked 128th, trailing behind countries like South Africa and India, a reflection of domestic tensions and international stances.

Regional Peace Indices

• United States Peace Index (USPI): Launched in 2011 by the same institute, this index measures peacefulness at the state and city level using homicide rates, violent crime, imprisonment rates, police density, and access to small arms. Maine, for instance, scored the most peaceful.
• United Kingdom Peace Index (UKPI): Released in 2013, it covers UK cities and regions. Findings included a near halving of homicide rates from 2003 to 2012, significant drops in violent and weapons crime, and estimates that violence costs the UK £124 billion annually (over 7% of GDP).
• Mexico Peace Index (MPI): Part of IEP’s national indices, it measures violence and its economic impact in Mexico. e.g., violence cost around 18% of Mexico’s GDP in 2016.

These sub-national indices highlight how peace correlates with crime reduction, economic growth, and social stability, often outperforming periods of economic turmoil.

How The Global Peace Index Relates to the Financial Markets

The GPI, and peace in general, has a significant impact on financial markets:

a. Peace Premium in Markets

• Financial markets often reflect the “peace premium.” For example, Financial Times reported in early 2025 that speculation around a ceasefire in Ukraine led to record gains in Europe’s DAX and Euro Stoxx indices. Analysts linked this to lower risk premiums, easing energy prices, and improved economic confidence, all conditions sparked by the prospect of peace.

b. Economic Stability and Peace

• Peaceful countries, particularly those at the top of the GPI, tend to attract more foreign investment, enjoy stable currencies, and experience sustained economic growth.
• Conversely, high conflict environments like Russia, Ukraine and Sudan, push away investment, destabilise regional economies, and create volatility in markets.

c. Cost of Violence

• The staggering global economic loss (≈11.6% of GDP) emphasises how violent conflict exerts downward pressure on economic potential through public spending on defence, supply disruption, refugee flows, and loss of human capital.

The Global Peace Index is much more than a static ranking. In the modern context, GPI data helps interpret financial market movements, geopolitical risk, and investment flows. The concept of a “peace premium” is real: as the Ukraine case shows, peaceful developments can spark bullish market behaviour in Europe. Conversely, rising conflict and militarisation, evident in recent GPI findings, often presage volatility, economic drag, and investor retreat. By highlighting the cost of conflict and benefits of peace, the GPI offers both policymakers and investors a data-grounded lens to evaluate risk, growth potential, and long-term stability.

At Contentworks Agency we follow the GPI and other financial indicators to create accurate and impactful financial services content for our clients. Book a free Zoom call with our team to talk about finance marketing,