News out of Eastern Europe was predictably foreboding on Thursday.

Kyiv says it’s being forced to shoot down Russian balloons used by the Kremlin “for reconnaissance or to confuse air defense systems”; Jens Stoltenberg described a “race of logistics” as the Ukrainian army uses more ammunition than its Western allies can replenish; experts worry the US will have to choose between a potentially dangerous reduction in America’s own military stockpiles and leaving Ukraine ill-equipped; both sides are suffering heavy losses in and around Vuhledar, a city that straddles the eastern and southern fronts; and according to local officials, Russia is attempting to cut off water supplies to “hundreds” of towns and villages in Kherson and Zaporizhzhia by reducing flows from a reservoir using a downstream dam.

More unnerving, perhaps, was a report that the Russian government is holding thousands of Ukrainian children, some as young as four months, in camps where they’re allegedly being prepared for “integration” into Russian society. And on and on.

Assuming fund managers read the news, it’s small wonder that geopolitics climbed the list of tail risks this month, according to one popular poll. It doesn’t help that every day seems to bring some new escalation in the Sino-US conflict which, in a worst-case scenario, could spiral into an existential crisis for humanity.

Notwithstanding concerns reflected in any surveys, risk assets don’t seem particularly perturbed by geopolitical developments. If you ask JPMorgan’s Marko Kolanovic, that’s yet another example of what he’s variously described as “complacency” on the part of markets.

“There is a perception that the energy crisis is over and that the war in Ukraine is not an issue anymore — supporting the record rally in European stocks — and recent geopolitical tensions related to China do not resonate with short-term financial inflows into the asset class,” he wrote.

Suffice to say Marko doubts Europe is out of the woods when it comes to energy security, and questions whether investors appreciate the potential ramifications of an East-West conflict.

“We believe that geopolitical risks may re-escalate in the near future, which would negatively impact European FX and equities,” he said, in the course of suggesting that although the combination of warm weather, higher LNG shipments and consumption curbs might’ve forestalled an energy reckoning in Europe, those measures may “only amount to a short-term Band-Aid at an unsustainable annual cost of 5% of EU GDP, along with shutdowns of industrial and residential consumption.”

Although front-month, benchmark European natural gas prices erased the war premium late last year, futures suggest prices will move higher again later in 2023. As Eurasia Group put it this week, “prices seem likely to remain structurally higher than they were before the Russian invasion.”

According to a report from Bruegel, a Brussels-based think tank, “€768 billion has been allocated and earmarked across European countries to shield consumers from the rising energy costs” since September of 2021.

The breakdown is €657 billion in the EU (€265 billion of which is accounted for by measures adopted in Germany), €103 billion in the UK and €8.1 billion in Norway. The figure below shows the cost as a percentage of GDP for several notable economies.

As Bloomberg wrote, editorializing around the same report, the cost of the energy subsidies now rivals what the EU earmarked for its COVID recovery fund, although that sum (€800 billion) doesn’t count government programs implemented during the worst days of the pandemic.

Kolanovic also mentioned Russia’s irritable reaction to the controversial Seymour Hersh account of the Nord Stream sabotage. “The situation remains quite fragile,” he wrote, cautioning that if Moscow were to disrupt supply further “as a response to recently published allegations,” the energy crisis may “rapidly escalate,” and that’s to say nothing of the looming offensive, which he said could “reduce risk appetite globally and negatively impact European assets.”

Finally, there’s the multi-faceted US-China quarrel. “The relationship [between] the West and China has also been deteriorating recently,” Marko wrote, adding that “as China regains economic momentum, one should expect more rather than less geopolitical tensions.”