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How the Stock Markets React to Terrorist Attacks

| September 13, 2021

Terrorist attacks over the last 20 years are impacting markets less and less

The August terrorist attack outside of Hamid Karzai International Airport in Kabul during the evacuation from Afghanistan reminds us not only of the sadness of terrorist cruelty, but also prompts consideration of the potential effects on the financial markets.  How do global markets react to terrorist attacks?  Is the effect long-lasting and restricted to some markets more than others? Should I change my investment plans?

Terrorist Attacks

Part of the intent of terrorist attacks is to scare people from visiting public places, shopping, or vacationing.  As a result, these attacks can hamper the economy.  Because markets detest uncertainty, there is an initial, knee-jerk reaction in the downward direction.  However, markets have generally shown their resilience as investors return their focus to economic fundamentals, and growth begins again.

A list of major attacks of recent years begins, of course, with the September 11, 2001 attacks in the U.S.  The list continues with the March, 2004 train bombings in Madrid; July, 2005 London subway bombings; April, 2013 Boston Marathon bombings; November, 2015 Paris attacks; and now the explosion that ripped through the Afghanistan capital of Kabul and claimed the lives of 182 people, including 13 members of the United States military.

Diminishing Effects

The negative impact on stock markets has diminished with each major terrorist attack since the 9/11 attacks.

After 9/11, the New York Stock Exchange remained closed for four trading days.  After the NYSE reopened on September 17, stocks declined and fell for the remainder of the week. The S&P 500 declined by 5.0% that day. The Dow Jones Industrial Average fell 7.1% on the first day and declined by 14% by week’s end.  Beginning the next week, however, stocks began a sustained rally over several months, lasting into January, 2002.

After the March, 2004 series of coordinated train explosions in Madrid, Spain’s IBEX 35 share index closed 2.2% lower.  U.S. stocks had already been trending lower.  The S&P 500 bottomed a few trading days later and then began to rise.  Other global markets fell immediately but regained their strength the following week.  The IBEX 35 increased 9.5% by year end.

In July, 2005 bombs went off in the London subways and on a bus.  Britain’s FTSE 100 index fell 4.0% the first day.  Although stocks initially fell, the markets rose past the pre-attack levels in under a week.  U.S. stocks fell early that day but ended the trading session almost 1% higher.  The FTSE 100 index rose 5.1% at year end.

After the April, 2013 attacks during the Boston Marathon, the S&P 500 fell sharply during the day.  However, the index rose 1.4% the following day.

The attacks in Paris occurred on Friday, November 13.  At the close on Monday, November 16, the first market day after the attacks, the French Index CAC 40 closed 0.1% lower.  It then rose for the remainder of the week.  The European Stoxx Europe 600 Index rose by 0.3% on Monday.  In the first week after the Paris attacks, the SPDR S&P Emerging Europe ETF rose by 3%. Because the attacks happened over the weekend, markets may have benefitted from investors having time to analyze and reflect.

The stock exchange indexes for New York, Spain, and Britain all began to rebound soon after the terrorist attacks.  In fact, with each ensuing attack, the markets took less time to recover from their initial declines.

Belgium Attacks

Brussels is the de-facto capital of the European Union. In fact, many European institutions and very large, international companies are headquartered there.

After initial news reports and the horrific images broadcast on cable news and across the web, global markets declined, U.S. futures fell and all European markets opened lower.

France's CAC and Germany's DAX indexes dropped by 1% in early trading, before trimming those losses somewhat. The FTSE in the U.K. is also lower and Asian markets closed mixed.

Shares of many specific companies did not fare as well, however. Specifically, shares in European airline, airport and hotel companies were sharply lower. For example, in the airline sector, Ryanair, EasyJet, Air France-KLM, Lufthansa and British Airways operator IAG saw their stocks drop by almost 5%.

Shares in hotel groups (Accor, InterContinental Hotels) were down, as were shares in airport operators, such as Fraport, which operates a major hub in Frankfurt and Aeroports de Paris, which dropped about 4%.

Kabul Airport Attack

On Thursday, August 26th, a terrorist bomb outside of Hamid Karzai International Airport in Kabul during the evacuation from Afghanistan killed 182 people, including 169 Afghan civilians and 13 members of the United States military, the first American military casualties in Afghanistan since February 2020.

The S&P 500, DJIA and NASDAQ all closed lower on that tragic Thursday, but then all rallied significantly the next day to end the week in positive territory with the S&P 500 and NASDAQ reaching new records.


The markets have sustained less damage due to terrorist attacks in ensuing years, for several reasons.

First, the sheer scale of the September 11th attacks distinguishes them from the more recent attacks.  The attacks hit two important cities simultaneously. Over 3,000 people died, two giant skyscrapers fell, and the Pentagon was hit.  The terrorists hit the center of the financial world and the headquarters of the world’s most powerful military. 

Second, the markets are no longer as shocked by these attacks because they have become used to them.  Sad, but true. Third, investors have found that, horrific as they may be, these atrocities have relatively little economic impact. 

While terrorist atrocities still shock individuals and governments, stock markets move on relatively quickly. 

Advice from a Financial Advisor

My advice to my clients is very simple: don’t do anything to your investments at the present time.

Instead, channel your energies into intentional prayers for every person in Afghanistan and every person you know and don’t know.

Because prayer is the world’s greatest wireless connection.