The Nexus Between National Security Risks and Financial Market Stability: Evidence from Emerging Economies

Nexus Between National Security Risks and Financial Market Stability

Authors

  • Farooq Omar Abdullah Accounting Department, Faculty of Law, Political Science and Management, Soran University, Soran, Kurdistan Region, IRAQ Author https://orcid.org/0000-0002-2939-0415
  • Nayar Muhiadeen Hamadamin Politics and International Relations Department, Faculty of law, Political Science and Management, Soran University, Soran, Kurdistan Region, IRAQ Author
  • Mahdi Mostafa Faqi Ahmad Politics and International Relations Department, Faculty of law, Political Science and Management, Soran University, Soran, Kurdistan Region, IRAQ Author

DOI:

https://doi.org/10.63841/iue24524

Keywords:

Geopolitical uncertainty, cybersecurity threats, market volatility index (VIX), foreign direct investment (FDI), panel data analysis

Abstract

Financial market stability in emerging economies is increasingly threatened by the rising complexity of national security risks. While economic indicators have long been studied as drivers of market behavior, recent global trends highlight the growing influence of political and digital threats on financial volatility. Among these, geopolitical tensions, terrorism, and cybersecurity breaches pose distinct and interconnected challenges to investor confidence and economic performance. Despite a growing body of research, the comparative impact of multiple security risks on market volatility remains underexplored, particularly in the context of structurally vulnerable emerging markets. Here we show that geopolitical risk is the most consistent and statistically significant driver of financial market volatility, while terrorism and cybersecurity incidents exert more episodic and context-specific effects.

These findings are derived from panel regression models using data from 2013 to 2024 across emerging economies, supported by robustness checks and visual analyses. Unlike previous studies that focus on isolated threats, our results reveal that macroeconomic fundamental—especially GDP growth and FDI inflows—serve as important stabilizing forces, mitigating the disruptive effects of security risks. By integrating multiple dimensions of national security threats into a unified empirical framework, this study offers a clearer understanding of how political and digital instability affects financial systems. The results hold practical value for policymakers and investors seeking to develop resilient strategies in increasingly uncertain global environments.

Author Biographies

  • Farooq Omar Abdullah, Accounting Department, Faculty of Law, Political Science and Management, Soran University, Soran, Kurdistan Region, IRAQ

    Farooq Omar Abdullah is an Assistant Lecturer and Coordinator of the Accounting Department at Soran University. He holds a master's degree in Islamic Banking and is actively engaged in interdisciplinary research at the nexus of finance, artificial intelligence, and geopolitical risk. He has authored several papers on FinTech, financial modeling, and Islamic finance.

  • Nayar Muhiadeen Hamadamin, Politics and International Relations Department, Faculty of law, Political Science and Management, Soran University, Soran, Kurdistan Region, IRAQ

    Nayar Muhiadeen Hamadamin is a Lecturer at the Department of Politics and International Relations, Faculty of Law, Political Science and Management, Soran University. His research interests focus on geopolitical security, international policy, and the economic consequences of conflict

  • Mahdi Mostafa Faqi Ahmad, Politics and International Relations Department, Faculty of law, Political Science and Management, Soran University, Soran, Kurdistan Region, IRAQ

    Mahdi Mostafa Faqi Ahmad is a Lecturer in the Department of Politics and International Relations at Soran University. His academic focus includes national security policy, international affairs, and the economic impact of terrorism and cyber threats in the Middle East

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Published

2025-10-25

Issue

Vol. 2 No. 04 (2025)

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Accounting and Finance

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How to Cite

The Nexus Between National Security Risks and Financial Market Stability: Evidence from Emerging Economies: Nexus Between National Security Risks and Financial Market Stability. (2025). Academic Journal of International University of Erbil, 2(04), 424-438. https://doi.org/10.63841/iue24524