Shock Transmission Map: How Geopolitical Risk Moves Oil, USD, Gold, and Stocks

A practical, evidence-based cheat sheet for what typically reacts first - and why

Geopolitical news can move markets in minutes, but the order of reaction is not random. In many events, the fastest moves show up first in assets that directly price the shock (energy supply) or absorb uncertainty (safe-haven flows). Equities often reprice in a second wave, once investors translate headlines into earnings risk, inflation expectations, and policy paths.

This article maps the common transmission channels and gives you a clean way to think about the first impulse versus the follow-through across four widely watched markets: oil, the US dollar (USD), gold, and stocks.

1. The science: why some markets move first

Most geopolitical shocks travel through two dominant channels:

• Supply and logistics (especially energy): events that threaten production, shipping routes, sanctions enforcement, or insurance costs can add an immediate risk premium to oil.
• Risk and uncertainty: when the probability distribution of outcomes widens, investors tend to seek liquidity and perceived safety, which can push demand toward USD and gold and away from risk assets.

The first impulse is usually about speed: which market can express the new information fastest and most directly? The second impulse is about depth: which assets must adjust once the shock changes inflation, growth, or policy expectations?

2. The reaction order by time window

Think in three windows. The same headline can produce different winners and losers depending on how long the shock lasts.

A. Minutes to hours: the first impulse

In the first hours, price discovery is dominated by headline risk and positioning. Typical first responders:

• Oil (Brent/WTI): reacts fastest when there is a credible supply threat or shipping choke-point risk.
• USD (broad USD index / major FX pairs): often catches a risk-off bid because the dollar is widely used for global settlement and funding.
• Gold: frequently rises as an uncertainty hedge when risk appetite deteriorates.
• Equity index futures: move quickly too, but the larger, more durable equity repricing often waits for clarity on duration and policy response.

B. Same day to 48 hours: pricing the scenario

This is the phase where markets decide whether the event is a temporary headline or a durable regime shift. Oil holds gains if physical supply risk persists; USD and gold hold if uncertainty remains elevated; equities differentiate by sector as investors price margins, rates, and demand.

C. Days to weeks: second-order effects

If the shock persists, the macro layer becomes dominant. Sustained oil strength can feed into inflation expectations and rate pricing. Equities reprice earnings, financing conditions, and discount rates. USD and gold can stay bid if global stress rises, but behavior depends on whether the shock is global or local.

3. The quick-reference cheat sheet (what usually reacts first)

If you need a practical default, use this ranking - with one condition: it is strongest when the event contains an energy or supply component.

1. Oil (when supply risk is real)
2. USD (risk-off FX demand)
3. Gold (safe-haven demand)
4. Stocks (full repricing as the scenario clarifies)

If the event does not threaten supply and is mainly a risk-off shock (fear, uncertainty, escalation risk), USD and gold can lead first while oil may move less or even fall if growth fears dominate.

4. Three common shock types (so you do not use the wrong model)

Type 1: Energy / supply shock

Examples: threats to major exporters, sanctions that constrain flows, attacks near key transit routes, or conflicts that raise shipping insurance. This is the classic case where oil leads and pulls inflation expectations higher.

Typical pattern:

• Oil spikes first; spreads widen; energy equities may outperform.
• USD and gold catch safe-haven bids as volatility rises.
• Broader equities weaken, especially travel, cyclicals, and rate-sensitive sectors.

Type 2: Risk-off uncertainty shock (no immediate supply constraint)

Examples: sudden escalation fears, political instability, or unpredictable policy changes that widen uncertainty but do not directly disrupt commodities.

Typical pattern:

• USD strengthens and gold rises as investors reduce risk.
• Equities fall, volatility rises, and defensives outperform.
• Oil response is mixed: it may rise slightly on precaution, or fall if the market prices weaker growth.

Type 3: Sanctions / financial plumbing shock

Examples: new restrictions on payments, trade financing, or access to foreign reserves; sanctions on major firms or banks; secondary sanctions threats.

Typical pattern:

• FX reacts first (USD funding demand, currency dislocations).
• Oil follows if the sanctions have direct supply implications.
• Equities reprice the earnings impact as companies and supply chains adjust.

5. A real-world example of the sequence

When geopolitical events include a credible energy supply risk, oil has shown the ability to move sharply on the day of the headline. For example, Reuters reported that on June 13, 2025, oil prices surged over 9% after Israel's strikes on Iran, while markets also saw a move toward traditional safe havens and a drop in stock markets.

6. How to use this in practice (without overtrading headlines)

A professional way to apply the cheat sheet is to separate signal from noise using three questions:

• Does the event threaten physical supply, shipping, or sanctions enforcement? If yes, oil is the first market to respect.
• Is uncertainty rising broadly (volatility, risk spreads)? If yes, watch USD and gold as fast proxies for risk-off demand.
• Is the event likely to last long enough to change inflation, growth, or policy expectations? If yes, expect a second-wave repricing in equities and rates.

Finally, remember that timing matters. The first impulse can reverse if the event de-escalates quickly. The best use of this framework is not prediction; it is interpretation: identifying which market is pricing the dominant channel first, and whether the follow-through confirms a lasting shock.

Conclusion

Geopolitical shocks are noisy, but the transmission channels are fairly structured. Oil often reacts first when supply is threatened; USD and gold often lead when uncertainty rises; equities often deliver the deeper repricing once the market can map the shock into earnings, inflation, and policy outcomes. Use the time-window model, classify the shock type, and you will read the tape with far less confusion.

Sources

• Reuters (June 13, 2025): Oil soars more than 9% after Israel strikes Iran, rattling investors. https://www.reuters.com/world/china/oil-prices-jump-more-than-4-after-israel-strikes-iran-2025-06-13/
• ONS (UK): Consumer price inflation, UK: December 2025. https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/december2025
• Bank of England: Interest rates and Bank Rate - our latest decision. https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate
• Shaik (2023): Impact of geo-political risk on stocks, oil, and gold returns. https://www.tandfonline.com/doi/full/10.1080/23322039.2023.2190213

Risk notice: Investing involves risk. This article is educational and not personal financial advice.