Geopolitical Shocks and Financial Market Transmission: Evidence from Global Stock Markets

This study examines how the United States–Iran military escalation of February 28, 2026, was transmitted across 17 global equity markets. Using event study, panel regression with Driscoll–Kraay standard errors, Fama–MacBeth estimation, and generalized autoregressive conditional heteroskedasticity (GARCH) modeling, we document significant negative cumulative abnormal returns of approximately −2.5%. A negative war effect ( β = −0.00356, p = .044) is confirmed under panel and cross-market frameworks, transmitted primarily through global risk sentiment. Interaction analysis reveals an oil channel sign reversal during the crisis. Extended-sample GARCH shows significant volatility elevation in 14 of 17 markets, consistent with a persistent shift in volatility conditions.

JEL Codes: G14, G15, F51, O16, C23