Shocking events such as September 11th usually have dramatic effects on the financial markets because financial markets are made up of individuals and if individuals suddenly, all at once, feel uneasy about the world, things can get ugly in a hurry. After the 9/11 terrorist attacks, the markets certainly reflected this.
Just as a little refresher, the first plane hit the WTC before the markets had opened and they were instantly shuttered. If one has been in that part of New York City, I am sure they can see why. It's uncomfortably close to the NYSE and American Stock Exchange. Leaving the markets open all day as the rest of the events unfolded could have led to a truly unfathomable sell off. With all of the rumors of as many as 40 planes high jacked, false reports of a bomb at the State Department, and everything else, we would have easily broken the 10% decline barrier that causes a one hour shut down at the NYSE and probably would have broken the 20% barrier as well. In fact, I think there would have been an outside chance at the 30% barrier as well. Rumor and fear were really out of control. Though I didn't have a brokerage account, I do have to say that watching the cascading collapse of the twin towers would have probably been enough to put in market sell orders.
Even though the markets were closed that Tuesday, and the next three days for that matter, time did not blunt the sell off much when the markets finally reopened on September 17th, 2001. While the 17th was certainly the worst day of that week, the rest of the week was certainly not exactly a walk in the farmer's market. By the close of business on Friday September 21st the Dow had dropped about 15%. The total U.S. market capitalization dropped nearly $2 trillion. At the end of the day, however, September 11th had relatively little economic impact. Bear in mind that the recession we were in at the time had started in March 2001. By November, it was over. Outside of the airlines and the hotels, very few companies had to cut their earnings forecasts due to 9/11. Some tech companies were still cutting their forecasts from the ever deflating technology bubble, but that's a different story altogether.
To be a bit more succinct, 9/11 had nearly squat all for economic impact outside of the financial market shock and even that was a very small effect in terms of a permanent impact. In fact, the disruption to air traffic had a very positive effect in reducing oil demand and therefore prices by nearly a third before they slowly started to crawl back. Further, and this is the more interesting part by far, were the opportunities created by the panic.
My favorite example is United Technologies (UTX), which is also one of the all time great stocks generally if you are interested in accumulating core positions. One of United Technologies' businesses is of course aircraft engines and of course if the airline industry was hurting they would buy fewer planes and therefore aircraft manufacturers would buy fewer engines. However, investors in their panic seemed to forget that United Technologies also has a large defense business that was bound to do quite well in an environment of increased defense expenditures. The results speak for themselves.
To conclude, whenever an upsetting event like a terrorist attack or natural disaster occurs, at some point your mind may perversely wonder "How will this affect my investments?". The answer is almost invariably that it will not affect your investments as much as the market would seem to indicate in its initial reactions and in those moments you can make a lot of money. Now, a genuine financial crisis like 2008, on the other hand, is quite a different story.