If you’ve ever watched the news and then checked your portfolio, you may wish you hadn’t. Oil prices spiked after U.S. and Israeli strikes on Iran, and tariff announcements in early April sent stocks tumbling. Yet in each case markets absorbed the shocks, stabilized and recovered. U.S. economic growth forecasts are generally resilient, and many stocks have reached new highs.
Even for seasoned financial analysts, it is difficult to predict when an event will cause lasting disruption. However, over time, patterns emerge.
We studied those patterns by analyzing the most important geopolitical events since the 2008 global financial crisis, including the Arab Spring, Russia’s invasions of Ukraine, the Covid pandemic and today’s trade disputes. We measured changes in the price levels of important assets — equities, currencies, bonds and commodities — by tracking changes over the five days leading up to an event and the 10 days after. Our analysis gave us a sense of the types of shocks that create significant and lasting market effects.
What we discovered may surprise investors. We found that many headline-grabbing world events, even military conflicts, did not move markets as significantly as many assume. Instead, the largest shifts often came from broader, longer-term geopolitical disruptions that put pressure on the mechanisms underpinning the global economy, particularly those that hit economic fundamentals. We found five patterns that drive market shocks.
Events that slow growth or raise inflation, especially those that alter trade and supply chains, set off the greatest market dips. The Covid pandemic caused the largest changes. After rapid and sharp falls in March 2020, the stock market took almost half a year to recover, through shutdowns, supply-chain disruptions and the associated policy responses. Close behind, albeit with a much faster recovery, were President Trump’s global tariffs in April and the U.S.-China trade negotiations in 2025. Shocks like these shift the flow of goods around the world and pose difficult trade-offs for central bankers and governments.
More than anything, structural uncertainty rattles markets. After the World Health Organization declared Covid a pandemic, people everywhere stared into the unknown, spurring the biggest single-day loss for the S&P 500 since the 1987 crash. Would it be two weeks, or two years, before life returned to normal? Would working practices, real-estate markets and social norms return to pre-Covid levels, or had the world fundamentally shifted?
Political uncertainty also shakes markets. Surprise election results or referendums such as the 2016 Brexit vote quickly reshaped perceptions of a country’s relative growth and competitiveness, which caused asset prices to fluctuate, particularly in foreign exchange markets.
Markets aren’t always great at predicting geopolitical consequences. A major event like the U.S. withdrawal from Afghanistan had little impact on financial markets. Afghanistan’s limited role in the global economy led investors to view the event, despite its political and humanitarian toll, as regionally isolated.
They weren’t wrong, but they didn’t anticipate what could happen next. Some geopolitical experts now view the Afghanistan withdrawal in 2021 as setting the stage for Russia’s 2022 full-scale Ukraine invasion by sowing doubts about U.S. commitments and Western deterrence. To take another example, when the United States didn’t enforce its chemical weapons “red line” in Syria in 2013, global markets were unfazed. However, this inaction may have prompted Russia’s expansion in Syria, prolonging the Syrian civil war, driving migration and reshaping elections in Europe.
Markets tend to underestimate how conflicts can drag on. At the start of 2025, some analysts thought the Russia-Ukraine war was about to end. Early market estimates put the probability of an imminent resolution at around 65 percent. The betting market and the yields available on Ukrainian debt reflected those expectations. Yet the war continues.
Not all assets react in unison. Corporate credit markets — where companies issue debt through bonds and loans — are usually stable through geopolitical events, unless the risk of companies defaulting on their loans rises. Short-term political instability, even military escalations, such as the perennial Chinese military drills around Taiwan, or the missile attacks by the Iranian-backed Houthis on Saudi Arabia in 2019, rarely affect credit markets. The strong demand for high quality credit from longer-term investors makes dips in corporate credit markets short-lived.
Yet events that threaten a country’s economic growth or creditworthiness, or that raise systemic threats to the status quo, such as Greece’s downgrades during the eurozone debt crisis, increase the yields on government and corporate debt. As a result, it becomes more expensive for those governments and companies to borrow.
With repeated shocks, markets tend to develop a form of immunity. The first time a shock happens — whether that’s a new trade barrier or deal — markets move substantially. We’ve seen this cycle repeat in recent months. The Trump administration’s proposed tariff increases in April, to levels unseen since the 1930s, created pronounced market reactions. Afterward, delays, deals and even the announcements of tariffs that previously would have been surprising prompted more muted responses.
Our world may be more volatile, but new risks get priced into ways of doing business. As the adage goes, “Time is more important than timing” in assessing your investment returns. So, the next time you hear about what some think is a “catastrophic threat” to your portfolio, you can take a breath. Markets are resilient, and not every geopolitical event that dominates headlines will create a lasting shock.
Jared Cohen is the president of global affairs at Goldman Sachs and a head of the Goldman Sachs Global Institute. He was previously the chief executive of Jigsaw at Alphabet and served as a member of the secretary of state’s policy-planning staff from 2006 to 2010. Sam Morgan is a head of Goldman Sachs’s global markets client coverage, leading coverage of institutional investors such as asset managers, hedge funds and insurance companies.
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