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Yahoo
4 days ago
- Business
- Yahoo
Stocks are at risk from the Iran-Israel conflict. Here's how quickly the S&P rebounded from the greatest shocks since WWII.
The S&P 500 has barely budged since the Israel-Iran conflict broke out. Deutsche Bank Research studied past geopolitical shocks and found the S&P tended to quickly rally. The index often recovers within weeks, but took almost six years to rebound from the 1970s oil crisis. The S&P 500 has shrugged off Israel's conflict with Iran so far, trading only 1% lower as of Tuesday's close. Even if the benchmark stock index does slide, history suggests it will come roaring back. "The escalation in the Middle East brings into focus the playbook for geopolitical shocks and risks, which entails sharp equity selloffs, which is intuitive, but also surprisingly quick recoveries, which is not," Deutsche Bank Research strategists Parag Thatte and Binky Chadha said in a recent note. "The typical pattern is for the S&P 500 to pull back about -6% in 3 weeks but then rally all the way back in another 3," they wrote, attaching a table showing how the index has fared during 32 previous geopolitical events. Jim Reid, Deutsche's global head of macro research, said in a note this week that a stronger market reaction could be sparked by direct US involvement in the clash or targeting of Iran's oil production or shipping infrastructure — or Iran deciding to close the Strait of Hormuz, which accounts for 20% of global daily trade flows. The Deutsche strategists' table offers a fascinating look at how the stock market has reacted to many of the most significant geopolitical events of the past century. The S&P, and the index that preceded its launch in 1957, has only crashed more than 20% following two geopolitical incidents. It fell about 21% after Adolf Hitler's Germany annexed Czechoslovakia in March 1939, and by 26% after the Nazis invaded France in May 1940. The benchmark tumbled more than 15% after the Israel-Arab War broke out in October 1973, prompting an oil embargo that blocked crude exports to the US and other nations, and after the First Gulf War began in August 1990. The S&P tanked by more than 10% on four occasions: North Korea's invasion of South Korea in June 1950, the 9/11 attacks in September 2001, Pearl Harbor in December 1941, and the Iranian hostage crisis in November 1979. This embedded content is not available in your region. Taking the median event, the S&P typically falls by 6% over 17 trading days and then rebounds fully over the next 16 trading days. It tends to rally nearly 15% from its trough over a 12-month period. However, a swift bounceback is not guaranteed. Recovering from the oil crisis of 1973 took 1,475 trading days or nearly six years, per Deutsche's table — with the S&P falling a further 28% from its trough over 12 months. The index also fell 15% from its trough in the year after the Berlin Wall was built in August 1961, and 13% in the year after President Nixon's impeachment proceedings began. At the other extreme, the benchmark soared by about 42% from its trough in the 12 months after the Israel-Hamas conflict began in October 2023. It jumped more than 30% in the year after North Korea invaded South Korea in June 1950, the Iraq War broke out in March 2003, and the Cuban Missile Crisis erupted in October 1962. It's too soon to say whether the Israel-Iran conflict will join the list of most impactful geopolitical events for the S&P. Reviewing historical market reactions may relieve investors as the index tends to recover quickly from these kinds of disruptions, though it's worth remembering the index can fall sharply and stay underwater for years. Read the original article on Business Insider Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Insider
5 days ago
- Business
- Business Insider
Stocks are at risk from the Iran-Israel conflict. Here's how quickly the S&P rebounded from the greatest shocks since WWII.
The S&P 500 has shrugged off Israel's conflict with Iran so far, trading only 1% lower as of Tuesday's close. Even if the benchmark stock index does slide, history suggests it will come roaring back. "The escalation in the Middle East brings into focus the playbook for geopolitical shocks and risks, which entails sharp equity selloffs, which is intuitive, but also surprisingly quick recoveries, which is not," Deutsche Bank Research strategists Parag Thatte and Binky Chadha said in a recent note. "The typical pattern is for the S&P 500 to pull back about -6% in 3 weeks but then rally all the way back in another 3," they wrote, attaching a table showing how the index has fared during 32 previous geopolitical events. Jim Reid, Deutsche's global head of macro research, said in a note this week that a stronger market reaction could be sparked by direct US involvement in the clash or targeting of Iran's oil production or shipping infrastructure — or Iran deciding to close the Strait of Hormuz, which accounts for 20% of global daily trade flows. Bouncing back The Deutsche strategists' table offers a fascinating look at how the stock market has reacted to many of the most significant geopolitical events of the past century. The S&P, and the index that preceded its launch in 1957, has only crashed more than 20% following two geopolitical incidents. It fell about 21% after Adolf Hitler's Germany annexed Czechoslovakia in March 1939, and by 26% after the Nazis invaded France in May 1940. The benchmark tumbled more than 15% after the Israel-Arab War broke out in October 1973, prompting an oil embargo that blocked crude exports to the US and other nations, and after the First Gulf War began in August 1990. The S&P tanked by more than 10% on four occasions: North Korea's invasion of South Korea in June 1950, the 9/11 attacks in September 2001, Pearl Harbor in December 1941, and the Iranian hostage crisis in November 1979. Taking the median event, the S&P typically falls by 6% over 17 trading days and then rebounds fully over the next 16 trading days. It tends to rally nearly 15% from its trough over a 12-month period. However, a swift bounceback is not guaranteed. Recovering from the oil crisis of 1973 took 1,475 trading days or nearly six years, per Deutsche's table — with the S&P falling a further 28% from its trough over 12 months. The index also fell 15% from its trough in the year after the Berlin Wall was built in August 1961, and 13% in the year after President Nixon's impeachment proceedings began. At the other extreme, the benchmark soared by about 42% from its trough in the 12 months after the Israel-Hamas conflict began in October 2023. It jumped more than 30% in the year after North Korea invaded South Korea in June 1950, the Iraq War broke out in March 2003, and the Cuban Missile Crisis erupted in October 1962. It's too soon to say whether the Israel-Iran conflict will join the list of most impactful geopolitical events for the S&P. Reviewing historical market reactions may relieve investors as the index tends to recover quickly from these kinds of disruptions, though it's worth remembering the index can fall sharply and stay underwater for years.
The Sun
6 days ago
- Business
- The Sun
US stocks rebound as investors brush off Middle East tensions
NEW YORK: US stocks ended higher on Monday, recovering from Friday's sharp losses as investors' concerns over ongoing hostilities between Israel and Iran eased somehow, Xinhua reported. Escalation of conflicts between Iran and Israel had briefly rattled markets -- oil prices surged, the Cboe Volatility Index (VIX) spiked, and gold prices rose as investors sought safe havens. However, Monday's action suggested confidence remained intact. High-yield credit spreads widened by just 2 basis points. The Dow Jones Industrial Average rose 317.30 points, or 0.75 per cent, to 42,515.09. The S&P 500 added 56.14 points, or 0.94 per cent, to 6,033.11. The Nasdaq Composite Index increased by 294.39 points, or 1.52 per cent, to 19,701.21. Seven of the 11 primary S&P 500 sectors ended in green, with communication services and technology leading the gainers by adding 1.53 per cent and 1.52 per cent, respectively. Meanwhile, utilities and health led the laggards by losing 0.50 per cent and 0.40 per cent, respectively. Market history supports the idea that geopolitical shocks are often short-lived in their market impact. According to Deutsche Bank analysts Parag Thatte and Binky Chadha, the S&P 500 typically drops around 6 per cent in the three weeks following a geopolitical event, but usually recovers those losses in the next three weeks. Deutsche Bank's Henry Allen added in a Monday note that geopolitical events tend to have lasting effects on equities only when they disrupt the real economy, either by slowing growth or driving inflation. So far, investors seem to be betting that neither scenario is likely in the near term. Despite lingering geopolitical concerns, historically low equity positioning and resilient fundamentals may be keeping a broader sell-off at bay, allowing risk appetite to return for now. 'Focus will remain on geopolitical headlines, but as long as the conflict stays limited between Israel and Iran, it's unlikely to materially impact the markets,' said Tom Essaye at the Sevens Report. Tesla rose more than 1 per cent on Monday, while Meta Platforms climbed 2.9 per cent, helping power the broader market. Palantir, often seen as a beneficiary of rising geopolitical instability due to its defence and AI ties, rose nearly 3 per cent. The rising move comes ahead of a key week for monetary policy. Investors digested a weaker-than-expected manufacturing survey released Monday morning by the New York Federal Reserves (Fed), adding to signs of slowing momentum in the industrial sector. Still, the data did little to shift expectations ahead of the Federal Reserve's interest rate decision on Wednesday. According to CME Group's FedWatch Tool, futures markets are pricing in a 100 per cent chance that the Fed will hold rates steady, despite renewed pressure from US President Donald Trump, who has called on Fed Chair Jerome Powell to cut interest rates. However, elevated oil prices stemming from the conflict in the Middle East are expected to keep inflation risks on the Fed's radar and reduce the likelihood of rate cuts in the near term. 'Markets got a reminder that tariffs aren't the only potential source of market volatility,' said Chris Larkin at E*Trade from Morgan Stanley. 'Right now, markets are signalling they expect the situation in the Middle East to remain contained, but any surprises could have an oversized impact on sentiment.'
The Sun
6 days ago
- Business
- The Sun
Wall Street rebounds as Israel-Iran tensions ease
NEW YORK: US stocks ended higher on Monday, recovering from Friday's sharp losses as investors' concerns over ongoing hostilities between Israel and Iran eased somehow, Xinhua reported. Escalation of conflicts between Iran and Israel had briefly rattled markets -- oil prices surged, the Cboe Volatility Index (VIX) spiked, and gold prices rose as investors sought safe havens. However, Monday's action suggested confidence remained intact. High-yield credit spreads widened by just 2 basis points. The Dow Jones Industrial Average rose 317.30 points, or 0.75 per cent, to 42,515.09. The S&P 500 added 56.14 points, or 0.94 per cent, to 6,033.11. The Nasdaq Composite Index increased by 294.39 points, or 1.52 per cent, to 19,701.21. Seven of the 11 primary S&P 500 sectors ended in green, with communication services and technology leading the gainers by adding 1.53 per cent and 1.52 per cent, respectively. Meanwhile, utilities and health led the laggards by losing 0.50 per cent and 0.40 per cent, respectively. Market history supports the idea that geopolitical shocks are often short-lived in their market impact. According to Deutsche Bank analysts Parag Thatte and Binky Chadha, the S&P 500 typically drops around 6 per cent in the three weeks following a geopolitical event, but usually recovers those losses in the next three weeks. Deutsche Bank's Henry Allen added in a Monday note that geopolitical events tend to have lasting effects on equities only when they disrupt the real economy, either by slowing growth or driving inflation. So far, investors seem to be betting that neither scenario is likely in the near term. Despite lingering geopolitical concerns, historically low equity positioning and resilient fundamentals may be keeping a broader sell-off at bay, allowing risk appetite to return for now. 'Focus will remain on geopolitical headlines, but as long as the conflict stays limited between Israel and Iran, it's unlikely to materially impact the markets,' said Tom Essaye at the Sevens Report. Tesla rose more than 1 per cent on Monday, while Meta Platforms climbed 2.9 per cent, helping power the broader market. Palantir, often seen as a beneficiary of rising geopolitical instability due to its defence and AI ties, rose nearly 3 per cent. The rising move comes ahead of a key week for monetary policy. Investors digested a weaker-than-expected manufacturing survey released Monday morning by the New York Federal Reserves (Fed), adding to signs of slowing momentum in the industrial sector. Still, the data did little to shift expectations ahead of the Federal Reserve's interest rate decision on Wednesday. According to CME Group's FedWatch Tool, futures markets are pricing in a 100 per cent chance that the Fed will hold rates steady, despite renewed pressure from US President Donald Trump, who has called on Fed Chair Jerome Powell to cut interest rates. However, elevated oil prices stemming from the conflict in the Middle East are expected to keep inflation risks on the Fed's radar and reduce the likelihood of rate cuts in the near term. 'Markets got a reminder that tariffs aren't the only potential source of market volatility,' said Chris Larkin at E*Trade from Morgan Stanley. 'Right now, markets are signalling they expect the situation in the Middle East to remain contained, but any surprises could have an oversized impact on sentiment.'
The Star
6 days ago
- Business
- The Star
U.S. stocks rebound as investors brush off Middle East tensions
NEW YORK, June 16 (Xinhua) -- U.S. stocks ended higher on Monday, recovering from Friday's sharp losses as investors' concerns over ongoing hostilities between Israel and Iran eased somehow. Escalation of conflicts between Iran and Israel had briefly rattled markets -- oil prices surged, the Cboe Volatility Index (VIX) spiked, and gold prices rose as investors sought safe havens. However, Monday's action suggested confidence remained intact. High-yield credit spreads widened by just 2 basis points. The Dow Jones Industrial Average rose 317.30 points, or 0.75 percent, to 42,515.09. The S&P 500 added 56.14 points, or 0.94 percent, to 6,033.11. The Nasdaq Composite Index increased by 294.39 points, or 1.52 percent, to 19,701.21. Seven of the 11 primary S&P 500 sectors ended in green, with communication services and technology leading the gainers by adding 1.53 percent and 1.52 percent, respectively. Meanwhile, utilities and health led the laggards by losing 0.50 percent and 0.40 percent, respectively. Market history supports the idea that geopolitical shocks are often short-lived in their market impact. According to Deutsche Bank analysts Parag Thatte and Binky Chadha, the S&P 500 typically drops around 6 percent in the three weeks following a geopolitical event, but usually recovers those losses in the next three weeks. Deutsche Bank's Henry Allen added in a Monday note that geopolitical events tend to have lasting effects on equities only when they disrupt the real economy, either by slowing growth or driving inflation. So far, investors seem to be betting that neither scenario is likely in the near term. Despite lingering geopolitical concerns, historically low equity positioning and resilient fundamentals may be keeping a broader sell-off at bay, allowing risk appetite to return for now. "Focus will remain on geopolitical headlines, but as long as the conflict stays limited between Israel and Iran, it's unlikely to materially impact the markets," said Tom Essaye at the Sevens Report. Tesla rose more than 1 percent on Monday, while Meta Platforms climbed 2.9 percent, helping power the broader market. Palantir, often seen as a beneficiary of rising geopolitical instability due to its defense and AI ties, rose near 3 percent. The rising move comes ahead of a key week for monetary policy. Investors digested a weaker-than-expected manufacturing survey released Monday morning by the New York Fed, adding to signs of slowing momentum in the industrial sector. Still, the data did little to shift expectations ahead of the Federal Reserve's interest rate decision on Wednesday. According to CME Group's FedWatch Tool, futures markets are pricing in a 100 percent chance that the Fed will hold rates steady, despite renewed pressure from U.S. President Donald Trump, who has called on Fed Chair Jerome Powell to cut interest rates. However, elevated oil prices stemming from the conflict in the Middle East are expected to keep inflation risks on the Fed's radar and reduce the likelihood of rate cuts in the near term. "Markets got a reminder that tariffs aren't the only potential source of market volatility," said Chris Larkin at E*Trade from Morgan Stanley. "Right now, markets are signaling they expect the situation in the Middle East will remain contained, but any surprises could have an oversized impact on sentiment."
