In this article, we will look at the 20 geopolitical events with highest impact on S&P 500. If you want to skip our detailed analysis, go directly to the 5 Geopolitical Events with Highest Impact on S&P 500.
The Significance of Geopolitical Events
The geopolitical events impact the financial markets across the world depending on the nature of the event. The assassination attempt on former US President Donald J. Trump is the latest geopolitical event investors have had to grapple with in recent years, alongside two major wars including Russia-Ukraine and ongoing Israel’s aggression on Gaza. Wars have far-reaching effects such as an impact on financial markets, in addition to enormous human toll. Geopolitics events that affect the economy drastically caution investors to look for safe haven investments or be out of the market until the situation comes to normal.
According to JP Morgan Private Bank’s recent client survey, 34% of the investors were potentially worried about geopolitical risks, while 29% of investors were bothered by potential recession fears in 2024. Whereas, almost 90% of the geopolitical events have not changed the direction of the world economy, as per Citigroup Inc.’s Global Wealth Report 2024. Geopolitical events mostly have short-term impacts on global asset prices. However, World War II and the 1973 OPEC Oil Embargo had the gravest impact on the financial markets.
The 1973 oil shock did have a lasting impact on equity returns. During the first 90 days, the S&P 500 plunged by nearly 13.04%, the highest among geopolitical events since 1940. The oil supply was limited for an extended period, leading to a macro state of ‘stagflation.’ In simple terms, high oil prices essentially stopped the economy from operating efficiently in the 1970s. On the other side, Russia’s invasion of Ukraine shocked global energy markets in 2022. However, additional oil supply limited the economic and market impact compared to its 1970s counterpart. Today, the US has a more secure oil supply compared to its heavy reliance on the Middle East.
In recent times, the rising conflicts in the Middle East and the Russia-Ukraine war have had major consequences. The US has been aiding Ukraine and Israel with military assistance. According to the US State Department, the US government has provided more than $55.7 billion in military assistance to Ukraine to fight against Russian invasion since the war began in February 2022. Whereas, the US government has supported Israel through legislation providing at least $12.5 billion in military aid, as of April 2024.
It has been a see-saw year for the global economies. The intensified conflict in the Middle East may impact oil prices with a potential disruption in regional supply. As of September 23, oil prices have been high as the conflicts soar, and due to last week’s outsized US interest rate cut expectations. As reported by Reuters, Yeap Jun Rong, the market strategist at IG International, said:
“Geopolitical tensions in the Middle East have edged up a notch between Israel and Hezbollah, which could leave oil prices well-supported on the risks of a wider regional conflict.”
Brent crude futures for November were up $0.60, or 0.8% at $75.09 per barrel, while the US crude futures for November were up $0.64, or 0.9%, at $71.64, as of September 23. In addition, both oil benchmarks soared over 4% last week due to the US rate cut, weaker demand sentiment in top oil importer China is capping the upswing, reported Reuters.
READ ALSO: 30 Least Peaceful Countries in the World and 12 Countries With Best Moody’s Credit Rating For Sovereign Bonds.
A Leader in Oil and Gas Sector
Exxon Mobil Corporation (NYSE:XOM) is one of the leading American multinationals in the oil and gas sector. The company engages in the exploration and production of crude oil and natural gas both domestically and internationally.
Exxon Mobil Corporation recently signed a MOU with an EV maker SK On. The oil and gas company has agreed to provide 100,000 metric tons of MobilTMLithium from its first planned project in Arkansas. This deal will help ExxonMobil’s goal of supplying lithium for almost 1 million EV batteries annually by 2030 and support the build-out of a US EV supply chain.
For the second quarter of 2024, Exxon Mobil Corporation (NYSE:XOM) surpassed earnings estimates, reporting an EPS of $2.14, up by 6.51% compared to anticipated earnings of $2.02 per share. Exxon Mobil posted $9.2 billion in earnings, making its second-best Q2 performance in the past decade. The company achieved this feat following record production in Guyana and the Permian Basin, where the output reached 1.2 million barrels per day. The company’s revenue came in at $93.06 billion, exceeding estimated revenue of $89.68 billion.
Alongside strong operational results, Exxon Mobil Corporation (NYSE:XOM) gave back $9.5 billion to shareholders, including $4.3 billion in dividends. XOM has more than 40 years of consistent dividend growth and averaged a 2.20% yield over the past five years. In addition, Exxon Mobil plans to invest between $20 billion and $25 billion annually in capital expenditures through 2027. With strong hedge fund sentiment, XOM is one of the 10 Best Affordable Stocks To Buy Right Now. Hedge fund interest in Exxon Mobil Corporation (NYSE:XOM) soared from 81 in Q1 2024 to 92 in Q2 2024. Madison Dividend Income Fund pointed out regarding XOM in the Q1 2024 investor letter:
“Our thesis on XOM is that it will grow production volumes of oil and gas moderately over the next few years, while limiting excessive capital investment that plagued the industry from 2014-2020. Production growth will come from its 2023 acquisition of Pioneer Natural Resources, which is the largest producer in the Permian basin. XOM plans to double its Permian output by 2027, to 2 million barrels per day. Capital spending will be limited to $20-25 billion per yearthrough 2027, which should allow for significant amounts of cash to be returned to shareholders including a $35 billion share repurchase program and continued dividend increases. Higher oil prices would provide a tailwind to our thesis but are not necessary. We think XOM can grow earnings and cash flow if oil prices remain above $60 per barrel…” (Click here to read the full text)
While we acknowledge the potential of XOM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Now, let’s take a look at the 20 geopolitical events with the highest impact on the S&P 500.
Our Methodology
To compile the data for 20 geopolitical events with the highest impact on the S&P 500, we gathered the data from Citigroup Inc.’s Global Wealth Report 2024. We have ranked the 20 geopolitical events in descending order of the highest average impact on the S&P 500, which includes initial impact, 30-day impact, and 90-day impact.
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20 Geopolitical Events with Highest Impact on S&P 500
20. Cuban Missile Crisis (10/19/1962)
Initial Impact: -3.78%
30-days Impact: 7.61%
90-days Impact: 17.16%
Average impact: 6.99%
The Cuban Missile Crisis of October 1962 was a confrontation between the US and the Soviet Union during the Cold War. This was one of the moments two superpowers came close to nuclear conflict. The initial impact of this event was critical and the S&P 500 dropped by almost 3.78%. In the next 30 days and 90 days, the S&P 500 recovered and surged by 7.61% and 17.16%, respectively. The Cuban Missile Crisis was one of the most significant geopolitical events with the highest impact on the S&P 500.
19. US Invasion of Iraq (3/20/2003)
Initial Impact: 2.49%
30-days Impact: 2.06%
90-days Impact: 15.57%
Average impact: 6.70%
In March 2003, the US forces invaded Iraq to destroy Iraqi weapons of mass destruction and end the dictatorial rule of Saddam Hussein. Today, the Iraqi government is asking the US government to withdraw the left troops from their soil. The US invasion of Iraq did not hurt the market and the average impact was on the S&P 500 index was a rise of nearly 6.70%. The US invasion of Iraq ranks among the 20 geopolitical events with the highest impact on the S&P 500.
18. JFK Assassination (11/21/1963)
Initial Impact: -2.81%
30-days Impact: 3.06%
90-days Impact: 8.28%
Average impact: 2.84%
The assassination of John Fitzgerald Kennedy, who served as the 35th US President, was one of the biggest events in modern history and had a far-reaching impact on US politics. JFK assassination slowed the market and the average impact was around 2.84% of growth. JFK’s assassination ranks 18th among the geopolitical events with the highest impact on the S&P 500.
17. Gulf War (12/24/1990)
Initial Impact: -4.16%
30-days Impact: 0.09%
90-days Impact: 12.1%
Average impact: 2.67%
The Gulf War was an armed conflict between Iraq and a 42-country coalition led by the US. The initial impact of the Gulf War on the S&P 500 index was quite notable with the market dropping by more than 4%. However, within three months the market had recovered but the war had an intense impact on the market during the initial period. The Gulf War ranks among the 20 geopolitical events with the highest impact on the S&P 500.
16. Brexit (6/23/2016)
Initial Impact: -2.30%
30-days Impact: 4.30%
90-days Impact: 3.72%
Average impact: 1.91%
Brexit is one of the biggest events in Europe in recent times. Brexit is a portmanteau of the words ‘British’ and ‘exit’, referring to the UK’s referendum to leave the European Union (EU) on June 23, 2016. Brexit is one of the recent geopolitical events with the highest impact on the S&P 500.
15. 2017 Escalation (8/7/2017)
Initial Impact: -0.24%
30-days Impact: -0.64%
90-days Impact: 4.44%
Average impact: 1.19%
The 2017 escalation began with North Korea’s testing of ballistic missiles over the Sea of Japan. This event was of grave concern to the US government. The 2017 escalation negatively impacted the market during its initial 30-day period.
14. World Trade Center Bombing (2/26/1993)
Initial Impact: -0.31%
30-days Impact: 1.67%
90-days Impact: 2.04%
Average impact: 1.13%
Before the 9/11 event, the World Trade Center suffered from a bombing terrorist attack. The market slowed down during the initial days of the event. The World Trade Center bombing ranks among the 20 geopolitical events with the highest impact on the S&P 500.
13. US Bombs Libya (4/15/1986)
Initial Impact: 2.95%
30-days Impact: -1.39%
90-days Impact: 0.16%
Average impact: 0.57%
The US government under President Ronald Reagan carried out air strikes, code-named Operation El Dorado Canyon, against Libya on 15 April 1986. The air strikes were carried out in retaliation for the West Berlin discotheque bombing 10 days earlier, which the Reagan regime blamed on Libyan leader Muammar Gaddafi. The US bombing of Libya had a negative impact during the first month after the air strikes and overall the market slowed down with an average of 0.57% increase in the S&P 500 index. This event ranks 13th among the geopolitical events with the highest impact on the S&P 500.
12. 2016 Nuclear Test (9/9/2016)
Initial Impact: -2.55%
30-days Impact: -0.81%
90-days Impact: 2.97%
Average impact: 0.13%
In September 2016, North Korea claimed that it successfully conducted what the world was worried about – a miniaturized hydrogen bomb that could be loaded onto a long-range missile. The 2016 Nuclear tests impacted the market as it was one of the major geopolitical developments of the decade. The 2016 Nuclear test ranks among the 20 geopolitical events with the highest impact on the S&P 500.
11. USSR Invades Afghanistan (12/24/1979)
Initial Impact: -2.27%
30-days Impact: 5.37%
90-days Impact: -7.78%
Average impact: -1.56%
The Soviet Union invaded Afghanistan in December 1979 and the war ended after 9 years, breaking the backbone of the USSR. The Soviet Union’s invasion of Afghanistan was one of the turning events in the region and ranks among the geopolitical events with the highest impact on the S&P 500.
10. Operation Paul Bunyan (8/18/1976)
Initial Impact: -3.15%
30-days Impact: 1.64%
90-days Impact: -4.32%
Average impact: -1.94%
Operation Paul Bunyan was carried out by the US in collaboration with South Korea to revenge the murder of two United Nations Command Officers, Captain Arthur Bonifas and First Lieutenant Mark Barrett, by North Korean soldiers on August 18, 1976. Operation Paul Bunyan ranks 10th among the geopolitical events with the highest impact on the S&P 500.
9. September 11 Attacks (11/9/2001)
Initial Impact: -11.6%
30-days Impact: 0.45%
90-days Impact: 4.34%
Average impact: -2.27%
The September 11 Attacks famously known as 9/11 were plane hijacking terrorist attacks by Al-Qaeda on the World Trade Center and Pentagon. These attacks had one of the devasting impacts on the market initially, causing a $1.4 trillion loss in market value. The S&P 500 plunged over 14% after the first week of attacks. The September 11 Attacks were one of the biggest geopolitical events with the highest impact on the S&P 500.
8. US Invades Panama (12/15/1989)
Initial Impact: -2.06%
30-days Impact: -3.73%
90-days Impact: -3.43%
Average impact: -3.07%
The US invaded Panama during the presidency of George H. W. Bush in mid-December 1989. The US invasion of Panama was one of the biggest geopolitical events with the highest impact on the S&P 500.
7. 2009 Nuclear Test (4/25/2009)
Initial Impact: -1.28%
30-days Impact: 5.09%
90-days Impact: -13.05%
Average impact: -3.08%
The 2009 Nuclear test was one of the initial tests carried out by North Korea. The market reaction to the 2009 Nuclear tests was intense. This makes the 2009 Nuclear test one of the major geopolitical events with the highest impact on the S&P 500.
6. Clinton Intern Scandal (8/20/1998)
Initial Impact: -12.3%
30-days Impact: -6.20%
90-days Impact: 5.59%
Average impact: -4.30%
US President Bill Clinton was involved in a sex scandal with his intern Monica Lewinsky. This event impacted the market quite hard and the S&P 500 index dropped over 6% in the first month after the sex scandal leaked.
5. Nixon/Watergate (3/15/1974)
Initial Impact: -1.72%
30-days Impact: -7.28%
90-days Impact: -8.04%
Average impact: -5.68%
The Nixon/Watergate scandal was a major political controversy in the US during the presidency of Richard Nixon from 1972 to 1974. This event ended with the resignation of Richard Nixon, the President of the US. The Nixon/Watergate scandal was one of the biggest geopolitical events with the highest impact on the S&P 500.
4. Korean War (6/23/1950)
Initial Impact: -12.8%
30-days Impact: -8.67%
90-days Impact: 1.20%
Average impact: -6.76%
The Korean War was fought between North Korea and South Korea and their allies on the Korean Peninsula. The Korean War had a devasting impact on the market and on average the S&P 500 fell by nearly 6.76%. The Korean War ranks fourth among the 20 geopolitical events with the highest impact on the S&P 500.
3. Pearl Harbor (12/7/1941)
Initial Impact: -6.87%
30-days Impact: -2.90%
90-days Impact: -12.02%
Average impact: -7.26%
The attack on Pearl Harbor by the Imperial Japanese Navy Air Service surprised the US. The Pearl Harbor event was the beginning of the World War II. The Pearl Harbor attack is one of the major geopolitical events with the highest impact on the S&P 500.
2. US Bombs Cambodia (4/29/1970)
Initial Impact: -15.3%
30-days Impact: -6.43%
90-days Impact: -4.94%
Average impact: -8.89%
The US bombing of Cambodia was one of the biggest geopolitical events with the highest impact on the S&P 500. The ‘Operation Menu’ was a covert US Strategic Air Command tactical bombing campaign conducted as part of both the Vietnam War and the Cambodian Civil War.
1. Arab Oil Embargo (10/18/1973)
Initial Impact: -16.23%
30-days Impact: -8.45%
90-days Impact: -13.04%
Average impact: -12.57%
The Arab oil embargo is the most significant geopolitical event with the highest impact on the S&P 500. The Arab oil embargo was a temporary cessation of oil shipments from the Middle East to the US. The OPEC ceased oil supply to the US due to its support of Israel during the Yom Kippur War.
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Disclosure. None. This article was originally published on Insider Monkey.
