Taiwan blockade or war: what it would do to chip stocks and markets, sector by sector
Under review: something we watch has changed (nEW ESCALATION). The figures stand until the review is done.
What is happening
Taiwan makes most of the world’s leading-edge chips. A blockade or invasion has never happened, and markets have never priced one.
Around 90% of the world’s most advanced chips are made in Taiwan, and the strait is a busy route for container ships.
Three ways it could go
Calm case · Gray-Zone Pressure
Today’s situation carries on. China keeps up the pressure with military flights near Taiwan, coast-guard patrols and the odd live-fire drill. It is intimidation, not interruption, and the military flights have actually become less frequent this year. Chips keep shipping and nothing breaks.
We put the chance of this at about 6 in 10 (likely).
Middle case · Quarantine / Blockade
China cuts Taiwan off for about a year, either with a blockade or by insisting on “inspecting” every ship. The world loses access to all of Taiwan’s chips. Bloomberg Economics estimates the world economy would be about 5.3% smaller in the first year. Makers of things that use older, simpler chips, like cars and electronics, would lose about 30% of their output.
We put the chance of this at about 1 in 4 (unlikely).
Severe case · Invasion / Fab Denial
Open war, with the United States drawn in. Bloomberg Economics estimates the world economy would shrink by nearly 10% in the first year, about $10.6 trillion, with Taiwan’s own economy down 40%. Chip supply from China, Japan and Korea is disrupted too, so even ordinary chips become scarce. If Taiwan’s chips truly cannot be replaced, the damage would be bigger still.
We put the chance of this at about 1 in 8 (very unlikely).
Which sectors are exposed
In the case we rate most likely (Gray-Zone Pressure), the sectors the model shows most exposed are Taiwan equities (−2.7%), Chip foundries (−2.5%), China equities (−1.8%). The model shows Defence (+12.5%), Reconstruction (+7.0%), Gold (+1.0%) moving the other way.
| Sector | Calm caseGray-Zone Pressure | Middle caseQuarantine / Blockade | Severe caseInvasion / Fab Denial |
|---|---|---|---|
| Taiwan equities | ▼ −2.7% | ▼ −61.6% | ▼ −88.0% |
| Chip foundries | ▼ −2.5% | ▼ −68.6% | ▼ −87.9% |
| Chip designers | ▼ −1.3% | ▼ −59.3% | ▼ −69.6% |
| Semiconductors | ▼ −1.2% | ▼ −54.8% | ▼ −64.6% |
| Downstream tech | ▼ −1.5% | ▼ −35.0% | ▼ −62.0% |
| Big tech | ▼ −1.5% | ▼ −35.0% | ▼ −62.0% |
| China equities | ▼ −1.8% | ▼ −34.2% | ▼ −59.6% |
| Chip equipment | ▼ −1.0% | ▼ −47.6% | ▼ −57.8% |
| Autos | ▼ −1.5% | ▼ −28.1% | ▼ −57.8% |
| EM equities | ▼ −1.8% | ▼ −26.6% | ▼ −54.5% |
| Broad market | ▼ −0.9% | ▼ −32.9% | ▼ −47.3% |
| EM bonds | ▼ −1.7% | ▼ −21.4% | ▼ −44.9% |
| Financials | ▼ −1.3% | ▼ −21.9% | ▼ −43.8% |
| Luxury | ▼ −0.4% | ▼ −21.2% | ▼ −38.4% |
| Airlines | ▼ −0.4% | ▼ −19.4% | ▼ −35.2% |
| Korea & Japan | ▼ −1.1% | ▼ −7.0% | ▼ −33.1% |
| Container shipping | 0.0% | ▼ −10.2% | ▼ −17.4% |
| Energy producers | ▼ −0.2% | ▼ −8.8% | ▼ −16.0% |
| Gulf producers | ▼ −0.1% | ▼ −7.1% | ▼ −12.8% |
| LNG | ▼ −0.1% | ▼ −7.1% | ▼ −12.8% |
| Agriculture & food | ▼ −0.1% | ▼ −7.1% | ▼ −12.8% |
| Tankers | 0.0% | ▼ −7.1% | ▼ −12.0% |
| Reconstruction | ▲ +7.0% | ▲ +15.2% | ▲ +24.0% |
| Utilities | ▲ +0.3% | ▲ +15.9% | ▲ +28.8% |
| Gold | ▲ +1.0% | ▲ +15.1% | ▲ +30.4% |
| Memory chipmakers | ▲ +0.8% | ▲ +34.4% | ▲ +30.8% |
| Defence | ▲ +12.5% | ▲ +34.9% | ▲ +57.2% |
No Taiwan blockade has ever happened, so these are reasoned estimates anchored to Bloomberg Economics — a map, not a forecast.
How sure are we?
Less sure. This has never happened, so nobody can measure it. Our numbers are careful estimates built on Bloomberg Economics’ work: a map of what could happen, not a forecast.
What to watch next
- Any episode that produces a real, measurable price window — Taiwan is unpriced because no analogue has yet produced a coherent fear signal.
- Foundry equity behaviour during escalation: the observed signal has been inverted or absent in every tested episode.
Your own holdings
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The other crises we model
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DELAX describes exposure. It is not investment advice.