This study aims to examine market reactions in the banking sector by market and region during the Israel-Hamas conflict. Moreover, we also explore the influence of sovereign risk and corporate characteristics on market reactions during the conflict. We analyzed a sample of 1,115 companies operating in the banking sector, using cumulative abnormal returns as a measure of market reaction. The results indicate that the banking sector exhibits a significant negative market reaction to the Israel-Hamas conflict. This finding is more pronounced in developed and emerging markets. By region, this finding is more pronounced in the Americas, the Middle East, and Asia. Additionally, sovereign risk exerts a significant negative impact on market reactions during announcement periods. This study contributes to the geopolitical finance literature by providing firm-level evidence from the global banking sector and highlighting heterogeneous market responses across market classifications, regions, and sovereign risk conditions during geopolitical conflict.
Defung et al. (2026) studied this question.