International Journal For Multidisciplinary Research

E-ISSN: 2582-2160   •   Impact Factor: 9.24

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Volume 8 Issue 5
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Geopolitical Conflict and Financial Market Responses: Evidence from the 2025 Iran-Israel Conflict

Author(s) Prof. Adwitiya Shambhunath Acharya
Country India
Abstract Geopolitical conflict can disturb equity markets through uncertainty, commodity-price movements, exchange-rate pressure and shifts in investor preference. This paper examines the short-term response of five equity indices - the Nifty 50, S&P 500, FTSE 100, Nikkei 225 and TASI - around the 2025 Iran-Israel conflict. Daily secondary data covering May to July 2025 were examined through an event-study framework, augmented Dickey-Fuller tests, correlation analysis, pre- and post-event mean comparisons and multiple regression. Price series were non-stationary at level but became stationary after first differencing, supporting the use of transformed series in subsequent analysis. The reported mean comparisons indicate significant differences between the pre- and post-event periods for the selected financial variables. Regression results, however, show that the direct war dummy is statistically insignificant across the five market models. Gold and the exchange rate significantly explain movements in the S&P 500 model, while the exchange rate is the only significant predictor in the Nifty 50 model. The models for the FTSE 100, Nikkei 225 and TASI have weak explanatory power. The evidence therefore suggests that the conflict affected markets mainly through indirect financial channels rather than through a uniform direct war effect. Market responses differed across countries, which highlights the importance of domestic market structure, exposure to imported energy, currency conditions and investor risk perception.
Keywords Geopolitical Risk, Iran-Israel Conflict, Stock Market Returns, Gold Prices, Exchange Rate, Event Study
Published In Volume 8, Issue 5, September-October 2026
Published On 2026-09-16
DOI https://doi.org/10.36948/ijfmr.2026.v08i05.87874
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CrossRef DOI prefix of IJFMR is 10.36948/ijfmr

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