Impact of the Israel–Hamas conflict on financial markets of MENA region – a study on investors’ reaction

Abstract

Purpose

This study aims to examine market reactions to the Israel–Hamas conflict in neighboring countries, particularly focusing on the Middle East North Africa (MENA) region.

Design/methodology/approach

The study adopts an event study methodology, employing average abnormal return (AAR) and cumulative abnormal return as measures to assess market reactions. The sample for this study comprises 1,314 companies, with October 9, 2023, identified as the event day for analysis.

Findings

The results of our study indicate that countries in close proximity to Israel and Palestine encountered detrimental effects on their capital markets, as evidenced by negative responses observed across various sectors. Our analysis also reveals that countries in the midst of conflict, particularly Israel, experienced a decrease in their stock markets across various sectors, with the exception of materials and real estate. In addition, our investigation reveals disparities in market responses according to different categories of company size.

Originality/value

This research is the first to study market reactions to Israel–Hamas in the MENA region at the company level.

Citation

Yudaruddin, R., Lesmana, D., Yudaruddin, Y.A., Ekşi̇, İ.H. and Başar, B.D. (2024), "Impact of the Israel–Hamas conflict on financial markets of MENA region – a study on investors’ reaction", Journal of Economic and Administrative Sciences, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JEAS-04-2024-0104