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Geopolitical conflict and firm-level stock market reactions: evidence from the 2026 US-Israel-Iran war

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  • Thanh Ngo

  • Anand Kumar

Abstract

This study examines the impact of the 2026 US–Israel–Iran conflict on the Indian stock market using an event-study framework and a firm-level cross-sectional analysis. Using daily stock price data for 1,715 firms listed on the National Stock Exchange of India, we estimate abnormal returns around the outbreak of the conflict and analyze the determinants of cross-sectional variation in stock market reactions. The results show significant abnormal returns around the event date, indicating that the geopolitical shock was rapidly incorporated into equity prices. Cross-sectional regressions reveal that firms with greater sensitivity to market volatility experience significantly lower abnormal returns during the event and post-event windows, highlighting the role of uncertainty-driven risk premia. In contrast, oil price sensitivity does not significantly explain cross-sectional differences in stock market reactions. The findings suggest that financial market uncertainty is the primary channel through which the geopolitical conflict affected Indian equities. This study contributes to the firm-level evidence on geopolitical risk, highlighting financial uncertainty over oil channels, and examining 2026 US–Israel–Iran conflict in emerging markets.

Suggested Citation

  • Thanh Ngo & Anand Kumar, 2025. "Geopolitical conflict and firm-level stock market reactions: evidence from the 2026 US-Israel-Iran war," International Journal of Accounting, Business and Finance, Indian Accounting Association, Patna Branch, vol. 4(2), pages 15-34.
    • Handle: RePEc:dbs:ijabfi:v:4:y:2025:i:2:p:15-34:id:309
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    1. Mohit Saini & Mahender Yadav & Vaibhav Aggarwal & Manoj Kumar, 2023. "All weather friends: How did the Russia-Ukraine war impact Indian stock markets?," International Journal of Diplomacy and Economy, Inderscience Enterprises Ltd, vol. 9(1), pages 93-111.
    2. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
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