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🌐 Series 9 — Global Investing & Economic Forces

Day 6: How Geopolitics & Trade Wars Affect Stocks

Why world tensions can shake your portfolio even if you’re staying far away from the conflict.

When I first started investing, I used to wonder why markets would suddenly fall even when company earnings were strong and nothing looked wrong.
Then I realised something important — stocks don’t just move because of earnings, valuation, or charts. They also move because of geopolitics.

Geopolitics is a fancy word, but its meaning is simple.
It refers to tensions, conflicts, alliances, and power struggles between countries.

And believe me, geopolitics can stir up markets faster than any earnings report.

Even if two countries on the other side of the world are arguing or fighting, you might still feel the impact in your investments — from rising oil prices to falling tech stocks.

Today, I want to break this down as simply as possible.
By the end of this, you’ll understand exactly why trade wars, sanctions, and conflicts shake the stock market… and what you can do to protect yourself.

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🔥 What Exactly Is Geopolitics?

Geopolitics simply means:

How countries behave, compete, and interact based on power, resources, geography, and national interests.

It includes things like:

• trade wars

• sanctions

• military tensions

• alliances

• political disagreements

• border disputes

• competition for technology or energy

Whenever something big happens between major countries, markets react — sometimes violently.

Because markets hate uncertainty.
And geopolitics is full of uncertainty.

🛑 Why Geopolitics Matters in Investing

Let me put it in simple terms.

When countries fight, argue, restrict each other, or block trade:

• companies lose access to customers

• supply chains get disrupted

• energy prices spike

• shipping routes get blocked

• governments impose tariffs

• investors panic

All of this affects the profits of companies… and profits affect stock prices.

So even if a company is doing well internally, geopolitics can still hit it from the outside.

🌏 Geopolitical Events That Shake Markets

Here are the types of geopolitical events that tend to move markets the most.

1. Trade Wars

A trade war happens when countries put taxes (tariffs) on each other’s goods.

This increases costs, slows trade, and hurts corporate profits.

The US–China trade war is the best example.
Tech stocks dropped.
Manufacturing companies suffered.
Supply chains scrambled.

2. Military Conflicts

Wars or military tensions instantly create fear in markets.

Why?
Because war creates:

• uncertainty

• higher oil prices

• slower global growth

• disrupted transportation

Investors tend to sell risky assets and run toward “safety.”

3. Sanctions

Sanctions block a country or company from doing business normally.

Sanctions can:

• freeze bank assets

• stop trade

• restrict technology access

• cut off financial systems

When sanctions are serious, stocks related to the target country can collapse.

4. Resource Conflicts

Countries fight over:

• oil

• gas

• rare earth metals

• water

• shipping lanes

When this happens, commodity prices jump, and markets react immediately.

5. Technological Rivalries

The battle for dominance in:

• AI

• semiconductors

• 5G

• chips

• cybersecurity

… can lead to restrictions and export controls.
This affects companies on both sides.

📦 How Geopolitics Disrupts Supply Chains

One of the biggest ways geopolitics affects stocks is through supply chains.

Companies today don’t build everything in one place.
They source parts from all over the world.

So when a country blocks exports, imposes tariffs, or goes into conflict, companies suddenly cannot get what they need.

This leads to:

• delays

• higher costs

• lower production

• lost revenue

Think about semiconductor shortages.
When global tensions rise, chip supply becomes vulnerable — and companies like car manufacturers suffer.

Your stocks can go down simply because a factory in another country got blocked.

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📈 Geopolitics and Oil Prices: The Most Immediate Impact

Whenever a geopolitical crisis hits the world, the first thing that moves is oil.

Because oil is the lifeblood of the global economy.

Conflicts in the Middle East, sanctions, shipping disruptions — they all cause oil prices to spike.

And when oil spikes:

• transportation costs rise

• airlines suffer

• delivery companies struggle

• inflation increases

• companies spend more

• consumer spending slows

This is why geopolitical events are often followed by market volatility.

💥 Why Trade Wars Hurt Stocks

Trade wars sound political, but the impact is very real for investors.

Here’s what happens during a trade war:

1. Higher Costs

Tariffs make goods more expensive.
Companies pass the costs to consumers or absorb the loss.

2. Supply Chain Chaos

Countries block exports or imports.
Factories get stuck waiting for parts.

3. Slower Global Growth

Trade wars reduce business confidence.
Companies stop expanding.

4. Stock Market Fear

Investors hate uncertainty.
They sell first and wait to understand the situation later.

The US–China trade war is the best case study.
Tech, manufacturing, automobiles, and even retail stocks dropped sharply whenever new tariffs were announced.

🧊 How Sanctions Freeze Markets

Sanctions are like cutting off oxygen for businesses.

If a country or company is sanctioned:

• they can’t sell their products

• they can’t receive foreign money

• they can’t use global financial systems

• they may lose access to technology

This affects:

• energy companies

• banks

• airlines

• shipping firms

• exporters

Sanctions hit both sides.
The target suffers, but so do companies relying on the target.

🧠 How Investors React to Geopolitical Tensions

This is the part many people underestimate.

When geopolitical tensions rise, investors often shift their money into:

• cash

• gold

• US treasuries

• defensive stocks

• safe havens like the Swiss franc

This shift causes:

• stock prices to fall

• market volatility to increase

• riskier assets to drop sharply

Most investors don’t look at geopolitics, but big institutions do — and they move billions of dollars based on global tensions.

Their moves affect your portfolio even if you are not watching the news.

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🛡️ Sectors Most Affected by Geopolitics

Some sectors are extremely sensitive to geopolitical issues.
Here’s a list to help you understand where risks are highest.

1. Technology

Tech is heavily affected because of:

• export bans

• chip restrictions

• cybersecurity risks

A tech rivalry between countries can push certain stocks down overnight.

2. Energy

Oil and gas are always involved in geopolitics.
Conflicts instantly change energy prices.

3. Defense & Military

Strangely, these stocks rise during conflicts as countries increase defense spending.

4. Airlines & Shipping

Conflicts disrupt routes, increase fuel costs, and affect travel demand.

5. Banks

Sanctions and global tensions make cross-border banking risky.

6. Manufacturing

Factories depend on global supply chains.
Any disruption hurts production.

🧭 Sectors That Benefit From Geopolitics

Believe it or not, some sectors actually benefit from geopolitical tensions.

1. Defense Companies

More conflict → higher military budgets.

2. Energy Producers

Higher oil prices → bigger profits.

3. Gold & Precious Metals

Investors rush to safe havens.

4. Cybersecurity Firms

Geopolitical hacking increases demand for protection.

5. Domestic Food Producers

When imports get blocked, local companies fill the gap.

🌐 Real-Life Examples of Geopolitics Moving Markets

To help you understand this better, here are some classic examples.

1. US–China Trade War

Tech stocks dropped.
Manufacturers struggled.
Global supply chains shifted.

2. Russia–Ukraine Conflict

Oil and gas prices spiked.
European markets fell.
Defense stocks surged.

3. Middle East Tensions

Oil jumped.
Transportation costs surged.
Airlines’ stocks weakened.

4. Chip Export Controls

Semiconductor companies dropped sharply as technology access was restricted.

You don’t need to remember every event — just remember this simple idea:
Geopolitics acts like a shockwave. Even if the problem is far away, your portfolio can still feel the vibration.

🔍 How I Analyse Geopolitical Risk as an Investor

Let me share the exact framework I personally use.

1. Know which regions your investments depend on

If a company gets its chips from China, and China faces restrictions, that stock is exposed.

2. Understand which commodities are affected

If tensions involve oil-producing countries, oil prices will spike.

3. Look at the currency reaction

A rising US dollar often signals fear.

4. Watch how capital flows

When risk increases:

• money leaves emerging markets

• money enters the US

• commodities fluctuate

5. Think like a business owner

Ask yourself:
“How would this political event affect my company’s costs, customers, and supply chain?”

This simple mindset change will make you a much more prepared investor.

💼 How to Protect Your Portfolio from Geopolitical Risk

Here are some practical steps you can use.

1. Diversify Across Countries

Don’t put everything into one region.
Spread your risk.

2. Hold Some Defensive Assets

Gold, utilities, and consumer staples can help stabilize your portfolio.

3. Avoid Overexposure to Conflict Zones

If tensions are rising in a region, reduce exposure.

4. Build a Long-Term Perspective

Geopolitical shocks usually make markets fall fast but recover later.

5. Keep Some Cash Ready

Opportunities appear during crisis periods.

6. Understand the Assets You Own

If you invest in tech, know where they get their chips.
If you invest in airlines, understand how oil affects them.

The more informed you are, the safer your portfolio becomes.

🧠 The Key Lesson: Geopolitics = Market Psychology

Geopolitics is not just about countries.
It is about fear, uncertainty, and investor confidence.

When fear rises, markets fall.
When confidence returns, markets recover.

Geopolitical events are emotional triggers for investors.
And in markets, emotions move money.

Final Takeaways

If there is one thing you should remember from today’s lesson, it’s this:

Geopolitics can shake the markets even if the crisis is happening far from you.
But if you understand how trade wars, conflicts, and sanctions work, you can protect your portfolio — and even find opportunities.

Always be aware of:

• how countries interact

• how global trade flows

• how energy routes shift

• how supply chains adjust

Once you learn to connect these dots, you’ll see markets through a completely new lens.

Most investors ignore geopolitics.
But now you don’t.

This alone makes you a smarter, more prepared investor.

🚀 Your Action Step

Take 2 minutes today to look at your portfolio.

Ask yourself these questions:

• “Which of my investments rely on global supply chains?”

• “Which stocks could be affected by a trade war?”

• “How exposed am I to energy prices or international tensions?”

If you can answer these questions clearly, you’re already ahead of most people.

Let’s keep learning, growing, and investing wisely together.

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DISCLAIMER

I make no representations, warranties, or guarantees, whether expressed or implied, that the content provided is accurate, complete, or up-to-date. Past performance is not indicative nor a guarantee of future returns.

I am an individual content creator and not regulated or licensed by the Monetary Authority of Singapore (MAS) as I do not provide investment services.

All forms of investments carry risks, including the risk of losing your entire invested amount. Such activities may not be suitable for everyone. You are strongly encouraged to seek advice from a professional financial advisor if you have any doubts or concerns.