Beyond the Smoke: Investment Lessons from the Israel-Iran 12-Day Conflict

 

Geopolitical conflicts often disrupt global economic stability by heightening uncertainty and distorting macroeconomic expectations. This uncertainty complicates decision-making for producers, consumers, and investors, particularly within capital markets, as the perceived risk environment shifts dramatically. Geopolitical tensions don’t just influence diplomacy, they reverberate through stock markets, oil prices, investor sentiment, and fiscal stability.

From June 11 to June 23, 2025, Israel and Iran engaged in a brief but intense 12-day military confrontation.

Though the conflict was short-lived, its economic reverberations were substantial, particularly due to Iran’s strategic role as a major oil producer. This retrospective analysis explores the implications of this conflict on global investment patterns, focusing on oil prices, stock market volatility, and how different economies, especially in Africa, responded to the shock. It concludes with key lessons for policymakers, investors, and emerging markets.

Crude Oil Prices: A 12-Day Shock with Global Ripples

The conflict triggered an immediate spike in crude oil prices, with rates jumping from $66.64 to $71.29 per barrel on June 13, 2025, following attacks in Iran. Prices remained high, reaching $74.9, until ceasefire talks began. As a global commodity, this surge affected economies worldwide—especially in developing regions like Africa, where higher energy costs strained household budgets, raised business expenses, and heightened inflation risks.

(See figure 1).

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Global Stock Market Response: Volatility, Rebound and Divergence

United States: S&P 500 Index

The S&P 500 demonstrated resilience during the Israel-Iran 12-day conflict. Initially showing moderate optimism, it experienced a slight dip (approx. -0.27%) as hostilities began, followed by volatility and fluctuations (between 5,967 and 6,045) throughout the conflict period (June 11– 23). However, the index notably recovered by the end of the conflict, returning to pre-war levels, and then strongly rallied post-conflict, reaching a high of 6,201.80 by July 1. This behavior highlights the S&P 500’s typical response to geopolitical shocks: a brief period ofcautious rebalancing and risk-off sentiment, quickly followed by a robust recovery and risk reentry as uncertainties diminish and focus shifts back to underlying economic fundamentals.

United Kingdom: FTSE 100 Index

During the Israel-Iran 12-day conflict, the FTSE 100 saw a mild but steady decline, slipping 1.4% from June 12 to June 23 as UK investors reacted cautiously to geopolitical uncertainty. While initially stable, the index’s muted post-conflict rebound—reaching only 8,787.99 by July 1—fell short of pre-conflict highs. This slow recovery reflects the FTSE’s exposure to sectors vulnerable to global growth and commodity swings, highlighting a typical pattern of investor caution during geopolitical tensions.

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African Markets: Resilience, Risk and Structural Contrast

Nigeria: NGX All Share Index

The NGX All Share Index showed initial calm during the Israel-Iran conflict, dipping marginally by 0.14% (from 114,820.86 on June 10 to 114,659.11 on June 11). However, as the conflict progressed, the index rose steadily, climbing nearly 3% from 115,429.54 (June 13) to 118,579.65 (June 23). This counterintuitive positive response was driven by investor optimism, as rising global oil prices were expected to boost Nigeria’s fiscal capacity and foreign exchange reserves

as an oil exporter. Following the conflict’s end, the index rallied further, gaining an impressive 2.25% to peak at 121,257.69 by June 25, fueled by relief and continued oil strength. While a subsequent cooling saw the index settle at 119,741.23 by July 1, the market still recorded a net gain of over 4.4% from its pre-war level. This demonstrates how Nigeria’s commodity dependence can paradoxically lead to short-term investor optimism amidst geopolitical shocks, driven by expectations of fiscal benefits.

Investor caution during geopolitical conflict creates ripple effects across

sensitive markets.

South Africa: JSE Top 40 Index

The South African JSE Top 40 Index initially showed modest optimism (88,686.25 to 89,326.22 from June 9-12) before the Israel-Iran conflict. However, the index sharply dropped by approximately 1.6% on June 13 to 87,856.89, reflecting global investor anxiety and risk aversion towards emerging markets. During the conflict (June 13-23), it experienced further downward pressure, reaching a low of 87,134.08 by June 20, driven by fears of escalation, though it saw a slight rebound as ceasefire talks emerged. Following the conflict’s end (from June 24), the JSE

Top 40 staged a gradual recovery, reaching 89,195.71 by July 1, its highest level in the observed period, due to easing tensions and renewed confidence. Overall, the market declined by nearly 2.5% during the war but recovered over 1.6% afterward, demonstrating its short-term vulnerability to geopolitical shocks and its capacity for rapid adjustment

Egypt: EGX 30 Index

The EGX 30 index experienced a sharp, volatile reaction to the Israel-Iran 12-day conflict. After showing mild optimism pre-conflict (rising to 32,935.19 by June 11), the index plunged by nearly 6% to 31,016.00 by June 15, reflecting heightened investor anxiety due to Egypt’s geopolitical proximity to the Middle East. It continued to decline during the conflict, reaching a low of 30,248.44 (over 8% cumulative loss) by June 19, driven by widespread risk-off behavior.

However, as ceasefire talks progressed, the index began a strong, V-shaped recovery, surging to surpass its pre-war high at 33,206.76 by June 29. This rapid rebound signals significant market relief, renewed foreign interest, and momentum as regional tensions cooled and oil prices stabilized

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Why All Share Index trend up during the conflicts?

During the Israel-Iran conflict, Nigeria’s NGX All Share Index rose while South Africa’s JSE Top 40 and Egypt’s EGX 30 declined—reflecting differences in economic structure and investor sentiment. Nigeria, a major oil exporter, benefited from rising global crude prices, boosting government revenue, FX reserves, and investor confidence. Its largely domestic investor base also made it less reactive to global risk aversion.

Meanwhile, South Africa and Egypt faced losses. The JSE Top 40 was hit by foreign capital flight and lacked oil-related gains. Egypt, closer to the conflict zone and a net oil importer, suffered from rising costs, inflation, and heightened geopolitical risk.

Lessons from the Conflict

For Nigeria

1.Double-Edged Sword of Oil Dependence: While Nigeria’s oil exporter status provided a surprising upside during the conflict, boosting fiscal health and investor confidence, it also highlights inherent vulnerability. Over-reliance on oil revenues exposes the economy to the volatile whims of global commodity markets. The lesson is to leverage oil windfalls (like those during crises) for economic diversification, investing in non-oil sectors to build long-term resilience and reduce susceptibility to future oil price downturns.

2.Strengthening Domestic Capital: The stability offered by Nigeria’s dominant domestic investor base during the crisis is a significant asset. Policies should continue to encourage and deepen local institutional investment, providing a more stable counterbalance to potentially flighty foreign capital during global uncertainties.

For Africa

1.Diversification is Key: The contrasting experiences across Nigeria, South Africa, and Egypt underscore that, African economies, despite regional ties, face distinct impacts from global geopolitical events. Nations heavily reliant on specific commodities (like oil for Nigeria) or globally sensitive sectors (like tourism for Egypt, or broad financial integration for South Africa) need robust diversification strategies to mitigate external shocks.

2.Building Fiscal Buffers: Governments should prioritize building substantial fiscal and foreign exchange reserves during periods of calm. These buffers are critical to absorb shocks from rising import costs (for oil importers like Egypt) or unexpected revenue declines, protecting their economies and populations. are also paramount.

The Israel-Iran 12-day conflict offers crucial lessons on how geopolitical tensions reverberate differently across economies and investment landscapes. The varied responses of Nigeria, South Africa, and Egypt underscore the importance of economic structure, market exposure, and investor behavior in determining resilience and vulnerability.

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Geopolitical shocks don’t strike equally. Nigeria thrived on oil windfalls;

Egypt and South Africa faltered under global exposure and import costs.

Economic structure and investor makeup determine resilience.

Diversification, domestic capital depth, and fiscal buffers aren’t optional;

they’re survival strategies.

3. Regional Cooperation and Infrastructure: Investing in regional trade and infrastructure can reduce overreliance on distant global supply chains, making African economies more resilient to disruptions in major maritime routes or commodity flows. Collaborative efforts to ensure regional stability are also paramount.

For Investors at Large

1. Understand Nuanced Market Drivers: The “one size fits all” approach to emerging markets during geopolitical crises is flawed. Investors must deeply understand the unique economic structures, commodity dependencies and investor bases of individual countries.

What negatively impacts one emerging market (e.g., rising oil prices for importers) can benefit another (oil exporters).

2 Geopolitical Risk as a Differentiator: Geopolitical events create both risks and opportunities. While leading to initial risk-off sentiment globally, they can also trigger sector-specific gains (e.g., defense, cybersecurity, specific commodities). Investors should identify which economies or sectors stand to gain or loss from particular types of conflicts.

3. Balance Short-Term Volatility with Long-Term Fundamentals: Markets often react sharply to initial geopolitical shocks but tend to recover as clarity emerges. For long-term investors, short-term volatility might present buying opportunities in fundamentally strong markets, provided the underlying economic conditions remain sound and the crisis does not escalate into a prolonged and systemic threat.
4. Embrace Diversification and Hedging: Robust portfolio diversification across asset classes, geographies, and sectors remains critical. Investors should also consider hedging strategies against currency volatility or commodity price fluctuations, which are common byproducts of geopolitical tensions.

Geopolitical shocks don’t strike equally. Nigeria thrived on oil windfalls; Egypt and South Africa faltered under global exposure and import costs.

Economic structure and investor makeup determine resilience.

Diversification, domestic capital depth, and fiscal buffers aren’t optional; they’re survival strategies.

BACITI Economic Insight

Conclusion

The 12-day Israel-Iran conflict underscores how geopolitical tensions swiftly disrupt global financial markets, reshaping investor sentiment and economic trajectories. While Nigeria’s All Share Index uniquely benefited from surging oil prices, this short-term gain highlights the inherent vulnerability of continued oil dependence. For Nigeria and other African economies, this episode reinforces the urgent call for policymakers and governments to proactively diversify economies, fortify domestic capital markets and build robust fiscal buffers to absorb future external shocks. Additionally, governments must enhance risk monitoring and deploy adaptive macroeconomic policies for rapid response. For investors, integrating geopolitical risk into decision-making and maintaining diversified portfolios become paramount.

Ultimately, true resilience in the face of global crises necessitates strategic, coordinated efforts between the public and private sectors, grounded in flexible economic planning and a forward looking development agenda.