This week, Talking Biz News Deputy Editor Erica Thompson reached out to Qwoted’s community of experts to inquire about the latest events in Afghanistan and how they might affect U.S. financial markets.
Check out some of the top commentary:
In the short term, US markets will experience little disruption on the back of events in Kabul. Military conflicts do not always impact share prices directly, particularly in countries like Afghanistan where there are relatively few connections to international markets.
Often it is economic indicators and the regional market environment that will drive investor sentiment, and what is happening on the ground in Afghanistan is having little impact on the surrounding region economically to date.
“The predominant influence for investors is Covid-19 amid questions hanging over the future policy positions of the Federal Reserve and other central banks.
“However, the Taliban’s takeover of Afghanistan could have longer-term implications for surrounding economies, and subsequently US markets, if the country becomes a cradle for extremist groups; exacerbating an already fragile regional security landscape.
Shifting political dynamics in the Middle East are unfortunately frequent events and U.S. financial markets can be impacted by them over the short-run but fundamentals of underlying companies generally prevail over the long-run. When news breaks of an event that can lead to widespread instability in the Middle East, equity markets have historically declined while safe haven assets such as Treasuries and Gold rally.
However, this volatility is generally short lived as the direct economic link between the U.S. economy and the Middle East is relatively low. Still, certain industries are more heavily influenced by developments in the Middle East, the most obvious being the oil industry and aerospace & defense industries. During times of conflict, oil prices generally increase as oil production decreases and these price increases are generally more persistent as a conflict has the potential to disrupt production for an extended period of time.
Sadly, the turmoil in Afghanistan will probably not affect markets at all. Markets don’t like surprises and the problems in Afghanistan haven’t been a surprise in close to twenty years.