Geopolitical Risk Analysis: Why Markets React but Cycles Still Lead
- 1 day ago
- 6 min read
The markets were rattled by Israel’s broad and aggressive strike on Iran’s nuclear infrastructure. With over 200 fighter jets involved and more than 100 strategic targets hit, the world witnessed one of the most direct military escalations in the Middle East in decades. Oil prices jumped, safe-haven assets surged, and traders scrambled to recalibrate their outlooks.
But as dramatic as this moment is, we’ve seen this kind of reaction before. Markets may lurch in response to headlines, but structure and cycles ultimately determine the path forward. Today’s events don’t change that reality—they reinforce it. This is the essence of our approach: focus on the macro patterns, ignore the noise.
Why Headlines Don’t Break Cycles
It’s natural to assume that war headlines override technical structure. After all, geopolitical conflicts trigger real-world consequences—disruptions in supply chains, shifts in investor sentiment, and spikes in volatility. But the historical record tells a more nuanced story. Major geopolitical shocks often create short-term dislocations, not sustained trend reversals.
In October 2024, Israel also struck Iranian infrastructure. Markets initially reacted in panic: oil spiked, stocks fell, and gold rallied. But within days, those moves were absorbed. Institutional buyers stepped in, structure held, and the prevailing cycle resumed.
This pattern is consistent across decades. Whether it was the Gulf War, 9/11, or Russia’s invasion of Ukraine, markets may react sharply—but unless economic function is impaired or policy changes, cycles continue to guide direction. These headline events are volatility triggers, not trendsetters.
What the Market Reaction Is Telling Us Now
Oil jumping into the high $70s and defense stocks rallying are textbook responses to geopolitical escalation. Travel stocks taking a hit is equally expected. But what’s more telling is where the strength is flowing—energy, commodities, defense, and safe-havens. That’s sector rotation, not panic.
Even more importantly, structure hasn’t broken. Key crossover averages remain intact. The 3/5 and 4/7 crossovers are still holding trend support, and we’re not seeing a rush toward liquidity like we would in a full risk-off event. This tells us institutions are watching—not running.
Markets are pricing in risk, not collapse. Volatility has expanded, but beneath the surface, positioning remains relatively stable. That reinforces the idea that this is a headline pullback, not the start of a bearish breakdown.
Inflation Fears and the Fed’s Dilemma
What markets fear most right now isn’t war—it’s stagflation. If oil continues to rise, inflation expectations could re-anchor just as the Fed prepares to pivot toward rate cuts. That puts the central bank in a bind: ease too early, and they risk reigniting inflation; wait too long, and growth could stall.
This policy uncertainty adds fuel to volatility. But again, we’re watching how price behaves around key cycle timing zones. Inflation-driven pullbacks often create tactical buy zones. When price dips toward rising support, and those dips align with short-term cycle lows, that’s when we act.
This approach allows us to prepare, not predict. We don’t guess when the Fed will pivot. We watch for the market’s reaction to policy shifts and position ourselves based on the structure that unfolds.
The Psychology of News-Driven Pullbacks
Headline pullbacks are emotional events. They shake out weak hands, attract bearish narratives, and increase trading volume—but they also offer disciplined traders a unique edge. Why? Because the crowd is reacting, while the patient are observing.
Traders who operate based on cycles and structure understand that pullbacks driven by fear often create the best entries. These are the moments when crossover levels act as magnets, offering natural areas of support.
We’ve seen this before—and we’ll see it again. Emotional traders sell weakness. Smart traders wait for signs of strength at structure, and then step in with confidence.
The Power of Short-Term Cycles During Global Events
Short-term cycles play a crucial role when volatility spikes. In the current setup, we’re watching the projected cycle low around June 16, which may offer the next opportunity to add exposure. If prices pull back into the 3/5 or 4/7 crossovers and begin to stabilize, that’s the tactical window.
It’s easy to get shaken during global events. But short-term cycles offer a roadmap. They help us filter out the noise and focus on what’s next, not what just happened. When cycle timing and structure align, the odds shift in our favor.
This doesn’t mean we ignore the headlines—it means we treat them as context, not strategy.
Institutions Aren’t Guessing—They’re Scaling
Institutional traders don’t panic on days like this. They scale in methodically, especially when price revisits support during increased volatility. They understand liquidity. They understand timing. And more importantly, they aren’t guided by headlines—they’re guided by structure.
That’s why we often see pullbacks into cycle lows followed by quiet accumulation. Dark pool activity rises. Volume is selective. And then, as fear fades, price begins to rise.
Check our post on Institutional Trading and Cycle Timing: Let the Structure Tell You When to Act for more info.
Recognizing the Opportunity Within the Fear
Markets move from fear to opportunity faster than most investors can pivot. The trick is knowing when the fear has run its course. That’s where cycle timing becomes powerful. As we approach the next short-term cycle low, and as price reacts at key crossovers, we’ll be looking for the structure to turn.
This is the discipline that defines our edge: don’t guess when the news cycle ends. Let the market tell you when structure shifts. Watch the pullback. Wait for stabilization. And then act when the signal returns.
This approach is how we avoid emotional trading—and position ourselves when others hesitate.
People Also Ask About Geopolitical Risk Analysis
How do geopolitical events affect the stock market?
Geopolitical events usually cause short-term volatility in the stock market. Conflicts, sanctions, or unexpected policy moves can lead to sudden reactions in oil, defense, and currency markets. However, long-term trends are typically shaped by structural factors like economic cycles, earnings, and monetary policy.
For traders using cycle-based strategies, these events often become entry opportunities rather than trend reversals. Watching for reactions at key cycle levels is more useful than reacting to headlines.
Can markets recover quickly from geopolitical shocks?
Yes, markets often recover quickly—sometimes within days—if the event doesn’t disrupt economic fundamentals. Investors might initially panic, but as clarity emerges, price tends to revert to its structural path.
A well-timed pullback aligned with cycle lows can become a strong entry point. The key is whether institutional support holds during the volatility. If it does, the market can regain footing quickly.
Is oil always the best indicator of geopolitical risk?
Oil is a sensitive barometer of geopolitical risk analysis, especially when events impact major supply routes or producers. However, its movements must be contextualized. A sharp spike in oil doesn’t always translate into sustained inflation or long-term bearish trends.
What matters more is whether oil-related inflation pressures influence central bank policy. In the current environment, oil spikes are watched closely for their potential to delay rate cuts or alter inflation expectations.
Should traders sit out during global conflicts?
Not necessarily. Sitting out may protect capital from volatility, but it can also lead to missed opportunities. If you follow cycles and price structure, you’ll often see that global conflicts provide high-quality setups—especially near short-term cycle lows.
Rather than stepping away, traders should use volatility as a filter. Focus on setups that align with crossover levels and confirm strength after dips. That’s where the opportunity lies.
What is the most important factor during headline-driven markets?
Discipline. In headline-driven markets, it’s easy to react emotionally. The traders who succeed are the ones who stay focused on structure, cycle timing, and price behavior—not the news feed.
Discipline means waiting for signals, watching for stabilization at key levels, and avoiding impulsive trades. This mindset separates those who panic from those who profit.
Resolution to the Problem
The problem many traders face during geopolitical escalations is overreaction. They see dramatic headlines, assume the worst, and exit positions too early—or enter the wrong trades at the wrong time. This reactive behavior erodes long-term performance.
The solution lies in stepping back and allowing structure and cycles to guide your decisions. Rather than viewing geopolitical events as threats, see them as tests. If price holds at key support levels despite fear, that’s institutional confidence. If cycles project upcoming lows, and price reacts accordingly, that’s opportunity.
Structure leads, news follows. That’s why our method isn’t about prediction—it’s about preparation. When the market pulls back into the timing of a projected low, you’re not surprised. You’re ready.
Join Market Turning Points
If this type of clarity resonates with you—if you’re tired of chasing headlines and ready to learn how to anticipate market shifts based on proven cycle timing and structure—then it’s time to join us.
Market Turning Points is where we teach traders how to build confidence, not reactiveness. We walk you through the cycle models, show you the crossover patterns that matter, and help you understand where real opportunity lies—even in volatile times.
Our philosophy is simple: follow the structure, ignore the noise, and trust the cycles. If you’re ready to take that next step, we’re ready to guide you.
Conclusion
The markets are absorbing a major geopolitical shock. Oil is rising. Fear is climbing. And yet, the structure is holding.
That’s the hidden story here: cycles still lead. Headline-driven pullbacks will always test your discipline. But if you understand the rhythm of the market—if you watch how price behaves at the key timing zones—then you’re not shaken. You’re prepared.
Let others chase the news. We’ll follow the cycles. That’s where the real edge lives.
Author, Steve Swanson