How Geopolitical Tensions & War Affects Stock Markets

By | July 8, 2018

Are you wondering how Geopolitical tensions and War affects stock markets? You will find there is a close connection between war, geopolitical tensions, and stock markets. No matter which part of the world face a war crisis, whether it is US-North Korea, US-Iraq, India-Pakistan or any other countries. When warlike situations arise, then you must trade or invest very cautiously. War affects stock markets badly and you can witness share market crash too.



Read: How Modi Government Reforms Impact Stock Market

How War Affects Stock Markets

When world war I started, traders throughout the world sell bonds and shares instantly. Because of massive selling, global stock markets were shut down immediately. While European stock markets were bleeding due to wars but US stock markets reacted positively after a shortfall. 

The attack on Pearl Harbour, the Korean War, Vietnam War, and the September 11 attack shake the stock markets.

When you find a war may happen or may not happen, then it is better to exit from stock markets as soon as possible. Although you can invest in companies that make military stuff like weapons, gunpowder, guns and things like that. 

You may notice that bourses always bleed when there is war or the hint of war, geopolitical tensions arise or a crisis of any sort. When broader markets move up, it usually means that the markets sentiments and the economy are flourishing.

You may aware of the recent surgical strike by Indian military on Pakistan soil. The moment this news flash, investors panicked and started selling in NSE and BSE. Indian markets closed nearly 3 percent lower from their highs on the announcement.

Read Also: How RBI’s Monetary Policy Impact Stock Markets

North Korea Testing Missiles

Geopolitical tensions due to North Korea and may trigger a war which eventually impacts stock markets across the globe. You may aware that North Korea conducted its sixth nuclear test, claiming it had detonated a thermonuclear bomb for the first time. 

According to various media sources, North Korea may test Inter-Continental Ballistic Missile soon. Really North Korea is testing the patience and anything can be happened. You may witness steep correction if any of this event go out of hand as war affects stock markets badly. 

You need to focus and analyze what actually happens in war and how war affects stock markets and the economy. Whenever two nations are at war, their main concerns and attention are towards the war effort.

When the war started, arsenal, guns and other war stuff are used heavily and need backup fast. Due to which economic activity in the defense sector picks up instantly. To supply huge amounts of artillery government require funds to support the war which result in the high inflation rate.

In other words, government expense may arise which not only affect the economy but also affects stock markets. A war will definitely trigger stock market correction and may collapse. So, it is better to exit from stock markets as early as possible.

Keep your cash in hand and once the war gets over, you can invest in right stocks. You can make really some money out of it and all you need is to wait. 

I hope you will understand the relation between geopolitical tensions, war, and stock markets. So, keep yourself away from it as war affects stock markets very badly.

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Published on: September 5, 2017

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