Analyzing Financial Market Reactions to the Palestine-Israel Conflict: An Event Study Perspective

Ijaz, Muhammad Shahzad; Ali, Shoaib; Du, Anna Min; Khurram, Mahrukh

Abstract

e use event study methodology to examine how the Palestine-Israel Conflict affected equities, metals, energy, fiat, and crypto currencies. The findings highlight the susceptibility of the stock markets in Germany, the United Arab Emirates, Bahrain, and Kuwait to geopolitical shocks by demonstrating notable negative abnormal returns on the event day. This observation is more evident in areas which have direct economic connections to the belligerent nations. Conversely, the fiat and cryptocurrency markets, along with metals and oil, exhibit insignificant abnormal returns, with the exception of a strong reaction observed in Ethereum and oil prices. These findings highlight the fluctuating levels of sensitivity across diverse asset classes as markets beyond Palestine's trading partners demonstrate resilience to the war. Overall, our work underscores the significance of assessing contagion risk especially in areas affected by geopolitical instability. It also holds implications for policymakers and investors to contemplate the geopolitical situation while evaluating market risks and portfolio diversification strategies amid political tensions.

Citation

Ijaz, M. S., Ali, S., Du, A. M., & Khurram, M. (2025). Analyzing Financial Market Reactions to the Palestine-Israel Conflict: An Event Study Perspective. International Review of Economics and Finance, 98, Article 103864. https://doi.org/10.1016/j.iref.2025.103864

• Journal Article Type: Article
• Acceptance Date: Jan 8, 2025
• Online Publication Date: Jan 9, 2025
• Publication Date: 2025-03
• Deposit Date: Jan 10, 2025
• Publicly Available Date: Jan 10, 2025
• Journal: International Review of Economics & Finance
• Print ISSN: 1059-0560
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 98
• Article Number: 103864
• DOI: https://doi.org/10.1016/j.iref.2025.103864
• Keywords: Palestine-Israel Conflict,q event study, global financial markets, geopolitical conflict