I’m writing to offer some thoughts on the horrific situation unfolding in Israel.
The devastating terrorist attacks have already cost thousands of lives and may profoundly affect the region.
While the violence might seem far away, behind every headline are real people, families, and communities that will never be the same.
Let’s take a moment to grieve for the folks who are suffering and dying and hope for a solution that will save lives.
How could an Israel-Hamas war affect the economy and markets?
Given Israel’s key position in the region, it’s likely that we’ll see energy prices impacted by the conflict, which could increase inflation. 1
Another concern is that this new conflict highlights how the world is becoming more fragmented.
If the war spreads to involve more major powers, it will inject more uncertainty and tension into a fragile world, and markets will likely react negatively.
What does history teach us about market reactions to geopolitical shocks?
History shows that markets typically view geopolitical crises as temporary setbacks.
I’ll note that the past doesn’t predict the future — but it often rhymes.
Let’s take a look at some examples from a 2022 study: 2
I’d like to note that “geopolitical event” is a very antiseptic phrase for horrors like bombings, wars, invasions, and other terrible attacks, and really fails to encompass the full cost in human misery.
While markets might recover quickly, too many lives will never be the same.
We can hope, pray, donate, and speak out.
And we can focus on what’s in our control: Ourselves, our actions and reactions, and our strategies for uncertain times.
Looking ahead, we can expect more volatility as the crisis unfolds and more data emerges.
I’m watching and I’ll reach out with more information as needed.
Let’s hug the people we love extra tightly today.
Do you know anyone personally impacted by the attacks? Will you comment below and tell me about them so I can keep them in my prayers?
Chart sources: https://www.reuters.com/markets/asia/live-markets-what-history-says-about-geopolitics-market-2022-02-18/ and http://glenview-insights.com/blog/geopolitical-events-and-stocks/
“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.”
– Benjamin Graham