Does combatant status matter? US banks and fintech firms' equity responses to the Iran–Israel war and Operation Epic Fury

Purpose This study investigates whether a home country's direct participation as a combatant in a military conflict alters the equity-return gap between traditional banks and fintech firms. Design/methodology/approach Using a market-model event study and a difference-in-differences (DiD) framework across 830 trading days (3 January 2023–24 April 2026), this study analyses 10 major US banks and 10 US-listed fintech firms. It examines market transmission during the 2026 US–Iran military escalation (Operation Epic Fury, in which the USA was a direct combatant) alongside a placebo event (the June 2025 Iran–Israel war, in which US involvement was limited to a single coordinated strike). Findings Around the Epic Fury announcement, banks recorded an 11-day cumulative average abnormal return of −8.66% versus +5.70% for fintechs (a 14.36 percentage-point gap). Panel DiD estimates reveal a fintech return premium of +0.98 percentage points on announcement day (t-statistic = 10.55) and +1.55 percentage points daily across the 11-day window (t-statistic = 3.25). The June 2025 placebo event showed no significant divergence (gap = −0.01 percentage points, p > 0.99). Divergence was concentrated at announcement rather than sustained across the broader conflict period. Research limitations/implications The empirical evidence relies on 20 US-listed financial intermediaries (19 in the panel regression because Fair Isaac lacks usable price-to-book) and a single direct-combatant episode, which may limit generalisability. Originality/value This study provides an early firm-level comparison of banks versus fintechs and introduces home-country combatant status as a conditioning variable in the geopolitical risk literature.