How U.S. Bank Stock Prices Respond to Geopolitical Risk

Geopolitical risk has emerged as a central driver of global financial markets, with episodes such as Russia’s invasion of Ukraine and recent conflicts in the Middle East triggering sharp movements in asset prices and increases in market volatility. This brief examines how geopolitical risk affects U.S. bank valuations and which institutions are most vulnerable. Through cross-border lending, foreign subsidiaries, and trading activities, banks face multifaceted exposure to geopolitical risk that can affect their profitability via credit losses, disrupted funding markets, and altered fee income. Banks’ valuations, in turn, influence their funding costs and capital-raising capacity, ultimately affecting credit supply to the real economy. And if geopolitical risk affects some banks more than others, it may create uneven vulnerabilities within the financial system, which would have implications for financial stability.