Geopolitical events don’t move markets randomly.
They move in phases, and those phases repeat across wars, sanctions, blockades, and crises.
Understanding which phase you’re in matters more than understanding the headline itself.
Let’s walk through the four phases, using real-world market reactions.
Phase 1: Headline Shock (Minutes → Hours)
This is the moment the world breaks.
What triggers it
- Military attacks
- Surprise sanctions
- Coups, invasions, blockades
Example: Russia Invades Ukraine (Feb 24, 2022)
- Oil jumped over 8% intraday
- European gas prices spiked violently
- Wheat futures surged (Ukraine & Russia = major exporters)
- USD & JPY strengthened immediately
Markets reacted before analysts finished writing headlines.
👉 The fastest money was made within hours, not days.
Example: Hamas-Israel War Begins (Oct 2023)
- Oil spiked immediately on Middle East escalation fears
- Gold jumped as a safe haven
- Risk assets sold off briefly
Even though supply wasn’t disrupted yet, fear priced first.
Reality of Phase 1
- Algorithms dominate
- Liquidity disappears
- Reversals are common
This phase rewards speed, not conviction.
Phase 2: Reality Pricing (Hours → Days)
Now markets ask the real question:
Does this actually disrupt supply, trade, or capital flows?
Example: Ukraine War – Week 1 to Week 3
- Oil didn’t just spike - it trended
- Wheat stayed elevated as exports stalled
- Defense stocks (Lockheed, Raytheon) started rising days later
- European equities lagged, US equities adapted
This is where trend traders and equity traders made cleaner money.
Example: Red Sea Shipping Attacks (2023–2024)
- Initial oil spike was modest
- Over days:
- Shipping costs surged
- Insurance premiums jumped
- Shipping stocks rallied
- Certain retailers and manufacturers lagged
The first move was fear.The second move was math.
👉 This phase is usually the best risk-adjusted window.
Phase 3: Policy & Response (Days → Weeks)
Governments and central banks step in.
Example: US Strategic Petroleum Reserve (SPR) Releases - 2022
- After oil surged on Ukraine fears:
- The US announced large SPR releases
- Oil stopped trending cleanly
- Volatility stayed high, but direction weakened
Markets didn’t crash, but the easy money was gone.
Example: Sanctions on Russia
- Early panic priced maximal damage
- Weeks later:
- Sanctions scope clarified
- Energy flows rerouted
- Discounts emerged (Russian oil via intermediaries)
Equities adapted faster than commodities.
👉 Phase 3 rewards rotation, not chasing.
Phase 4: Normalization & Fade (Weeks → Months)
This is where most retail traders lose money.
Example: Oil After Ukraine Initial Spike
- Oil peaked near ~$130
- Months later:
- Demand destruction kicked in
- Alternative supply emerged
- Prices faded hard
Late buyers anchored to headlines, not price structure.
Example: Gold After Crisis Peaks
- Gold often spikes during crises
- But once:
- Rate expectations stabilize
- Fear becomes familiarGold frequently drifts or reverses, despite ongoing conflict
👉 The market had already priced the risk.
Why These Examples Matter
Across different wars, regions, and assets, the pattern is the same:
- Fear moves price first
- Reality refines the move
- Policy caps the upside
- Time kills the trade
The headlines can stay dramatic for months.The profit window cannot.
The Professional Mental Model (With Examples)
Phase - What to trade - Historical winners
Phase 1: Commodities, FX - Oil (Ukraine), Gold (Middle East)
Phase 2: Commodities + equities - Defense stocks, energy equities
Phase 3: Equities, relative value - Shippers, insurers, suppliers
Phase 4: Mean reversion - Oil fade, gold consolidation
Final Takeaway
Most traders ask:
“Is this war going to get worse?”
Professionals ask:
“Is the market still mispricing it?”
Because geopolitics doesn’t reward belief.It rewards timing across phases.
