The Ripple Effects of the Iran-Israel Shadow War: A Quantitative Analysis of Spillover Effects on Global Energy Markets, Supply Chains, and Financial Stability

The long-running and increasingly heated conflict between Iran and Israel is causing economic problems in lots of different ways, and current ways of assessing political risk are not very good at understanding them. This report creates a detailed system for finding, measuring, and creating a model of how this uneven battle impacts three very important areas: world energy markets, how goods are shipped around the world, and how prices of investments change. Looking at what happened at specific times (using “event study methodology”), modelling how much prices jump around (using “Generalized Autoregressive Conditional Heteroskedasticity (GARCH)”), and using a complex modelling method called “structural vector autoregression” on daily information from January 2020 to March 2026, the research shows that when Iran and Israel directly fight each other, the extra cost of oil (the ‘risk premium’) goes up by an average of 4.2% for each period of fighting. And when groups acting for one of the sides cause trouble - especially the Houthi attacks in the Red Sea - container shipping between Asia and Europe decreased by 43.1% when those troubles were at their worst. When investors look for safer places to put their money, they are notably moving to gold (increasing by 27.3% in total) and the US dollar. Bitcoin, however, moves with riskier investments and does not act as a protection against losses. The report also shows that investments in Israeli tech companies fell by 56.8% when the conflict was at its height, and that this is a danger for the global supply of semiconductors and cybersecurity. Based on this, the report has suggestions for international financial organizations, countries that import a lot of energy, and companies that manage risk.