Market Update: War Breaks Out in the Middle East


John Micklitsch, CFA CAIA, President & Chief Investment Officer

Markets weakened initially following news of the Hamas attacks on Israel over the weekend but have since stabilized. The incursion and Israel’s war declaration creates additional uncertainty in the geopolitical and global economic landscape. For example, oil prices spiked by about 4% as armed conflict looms heavily over a region that is volatile even in the best of times.

The near-term uncertainty factor is the primary reason markets tend to sell-off in the face of conflict. The following table contextualizes the extent of that based on past events. Not listed due to its relative recency is Russia’s invasion of Ukraine, which resulted in an approximately 4.5% S&P 500 Index drop in the weeks following the initial strike. We continue to believe that well diversified and high-quality portfolios will endure this current conflict as they have in the past.

Geopolitical Events And Stock Market Reactions

Other issues this attack highlights are that the world remains a dangerous place and defense spending is likely to stay elevated. In addition, “onshoring” to de-risk global supply chains is likely to continue if not accelerate in the face of the new regional conflict.

For further discussion of the geopolitical risk environment, please join us for a webinar later this month where we will be joined by a global risk and defense expert from TD Cowen, a division of TD Securities. We invite you to learn more and register for this event.

Author’s Note: Please note that here we discuss only the potential economic and market impact of these events, acknowledging that the physical and emotional toll has been far greater and that the situation is still developing. Our thoughts are with all those whose lives are affected by these events.

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