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Simulation study reveals that propagated geoeconomic shocks exceed direct exposure by four to five times across corporate portfolios, indicating that network position governs corporate vulnerability.
Firms are affected differently by geoeconomic shocks within an industry. Trade screens and historical correlations can miss how chokepoints redistribute physical losses, price exposure, and trading opportunities among the firms in a sector. This article presents a firm-level portfolio stress test that connects global input–output propagation to firms’ disclosed country–industry footprints and contingent positions. Applying each operator to all 30 scenarios, propagated stress is typically four to five times direct exposure: The median cascade-to-direct ratio is 4.07 under the demand-pull Leontief operator and 5.13 under the supply-push Ghosh operator, and the wide range of results means there is no single universal multiplier. In the 2026 Strait of Hormuz near-closure, a closure-severity diagnostic and a rerouting stress test show where the assumption of fixed supply relationships matters, and when the major oil companies are compared, common market and balance-sheet measures cannot assign the sign of their earnings. Network position governs where modeled stress lands. What that stress means for a firm depends on the scenario, the direction of propagation, and the firm’s disclosed footprint. The result is an auditable hedge diagnosis, not an earnings forecast or a trading recommendation.
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Mikhail V. Oet (2026) studied this question.
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