Terrorism has a big effect on the economy of any country. This is what happened in the US on the morning of Tuesday 11th of September 2001. On this day, more than 3000 people lost their lives. Not only that, it goes down in history the time the NYSE and Nasdaq offices remained closed for seven days. never opened up for trading. This is considered a dark day in the history of the US because many lives and property were lost. Worse, the attack crippled the stock market and the overall economy of the country. This article explains the aftermath effects of the 9/11 attacks on the stock market.
The Aftermath Effects of 9/11on the US Stock Market
Many sectors were affected by the terrorist attacks on the 11th of September 2001. The following are the major sections that felt the impact:
Overall Market Hit
As earlier mentioned, the NYSE and NASDAQ closed all businesses until September 17th. Many big financial firms also remained closed because they had their headquarters bombed business center. Most of them had lost valuable assets and staff members in the attacks.
It was on this day that the Dow Jones business dropped 684 points, setting a new world record. The major firms saw a significant drop in the market, include the Dow Jones, the S&P 500 Index, Nasdaq, and Gold.
While other businesses were dying, oil and gas prices skyrocketed. Many people suspected the closure of importation from the Middle East. But it wasn’t long before the prices normalized.
Airlines and Insurance Sectors
The two sectors that were affected greatly were airlines and insurance. The leading airlines, American Airlines and United Airlines faced big losses after their airplanes were used in accomplishing the terror attacks. Records indicate that American Airlines (AAL) declined by 39%, and United Airlines (UAL) plunged by 42%.
Many insurance firms had hard times as they had to pay billions of dollars to the victims of the 9/11 attack. Warren Buffet’s Berkshire Hataway was one of the most hit firms. This compelled many insurance firms to remove terrorist coverage. The only lucky insurance companies that managed to go through the fallout had cash reserves to pay for the damages.
Increased Protection Investment
Not all stock sectors were affected negatively by the September 11 attacks. Some technology companies and defense and weapon contractors enjoyed big profits. Many investors predicted an increase in these sectors as the country was preparing to launch a series of attacks on terrorists. In addition, stock prices increased in the communication and medical sectors.
Further, the put and call volume options saw a significant increase in exchange boards across the country. With put options, investors can profit from sugging stock prices. Many put options were bought on sectors with high risks of physical attacks like the airlines, insurance, and banking. The call options enable investors to profit from an increase in stocks. Top inventors purchased shares in defense and military sectors as the prices were increasing steadily.
Vulnerability of the Stock Market to Physical Disruption
The attack of September 11th helped investors to know the vulnerability of the stock market and how it can be affected by physical disruption. Even though the NYSE office was not destroyed, the bombing damaged communication channels with business towers.
To add on, the re-opening of the stock market was hindered by the Ground Zero recovery operation. Following this event, the major exchange firms, including NYSE, set measures to boost their defense against any future disruptions. In as much as this move reduced physical attacks on the US, it increased its vulnerability to cyber-attacks. The new cyber-warfare poses a big risk to many areas of life, including the financial systems.
The Wrap
The impact 9/11 attacks still affects the US economy to this day. The country is struggling to pay a lot of money it used to finance the revenge wars in Iraq and Afghanistan. Even though taxpayers have managed to repay about $1 trillion so far. However, the debt is expected to increase higher in the coming years. While the attacks destroyed property, it also enabled investors to know the impeding dangers and risks.
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