Geopolitical instability in the Middle East and the Korean stock market: a sector-level event study

This study investigates the effects of four Middle East-related geopolitical events during 2023–2025 on returns across eleven Korean stock-market sectors using a market-model event study. Sector responses are heterogeneous: Transportation and Storage records significant losses, Steel exhibits significant gains following repeated shocks, and Defence consistently displays positive cumulative abnormal returns (CARs). Aggregate reactions shift from negative around the first shock to positive as similar shocks recur, consistent with adaptive learning and experience-based learning. Effects are most pronounced immediately prior to the event day. Results are robust to alternative windows, Adj-BMP corrections, multifactor models, bootstrap inference, and winsorisation.