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As you probably know by now, the Russia-Ukraine conflict has greatly intensified after Russia’s recent invasion of Ukraine. In addition to the political and humanitarian disturbances this has caused, this conflict has had a significant effect on the economic situation as the sanctions against Russia have affected gas and oil prices, thus inevitably causing higher inflation across the board. 

It’s not just the energy sector that is having a big impact on the global economy. Ukraine has been referred to as the bread basket of the middle east supplying ⅕ of the world’s high grain wheat.  Russia has blockaded the normal route for this grain through the Black Sea onto the Mediterranean.

With this modern European war situation at the forefront in the media and in many people’s lives, it’s natural to wonder how wars typically affect the stock market and the economy overall. This is precisely what we will be discussing in this article—how wars affect the economy, your investments, and how one can expect the stock market to react in times of war. 

Do Stocks Drop During Wartime? 

Looking at how the market has reacted to past political conflicts, we can say that stocks have largely been unaffected by them in the long run. Along with that, one can claim that wars positively affect the markets in certain situations. 

Experts such as Ben Carlson, director at Ritholtz Wealth Management, rightly point out that from the time World War II began in 1939 until it ended in 1945, the Dow Jones was up more than 50%. One has to keep in mind where stocks were before World War II. We were in the Great Depression and the stock market had a steep decline before the War. In fact, many people offer the War as the reason we got the stock market out of the doldrums.

The stock market peaked on Sept. 3, 1929, with the Dow at 381.17. The ultimate bottom was reached on July 8, 1932, when the Dow stood at 41.22. From peak to trough, the Dow experienced a staggering loss of 89.2%. And in total, during the two biggest wars in world history, “the U.S. stock market was up a combined 115%.” 

These numbers show that the relationship between wartime and the stock market isn’t always simple. Let’s take the most recent examples. We can see that when Russia invaded Ukraine in February, the S&P 500 fell by more than 7% due to the fact that the U.S. and other nations started to impose economic sanctions on Russia. This concerned investors, who started to worry about the prices of commodities like gas, oil, etc. Russia invaded Ukraine on February 24th and the S&P 500 dropped as low as 41114. Over 100 days later on June 6th, after a brief rally, the market headed lower trading at levels the day of the attack. In short, the jury is still out on the Russian Ukraine invasion.

What History Tells Us 

There are many examples throughout history that can help us understand the way the market reacts in wartime. Here is a brief overview of the stock market’s reaction during some of the most well-known conflicts of the recent past.


Within six months from the start of World War I, the Dow Jones fell by around 25%, partially because the war made many businesses worldwide come to a halt, and market liquidity almost dried up.

After months of being closed, the Dow reopened in 1915 and rose more than 88%, which is still the highest annual return on record. Over the entire period of WWI, the price of U.S. stocks grew significantly.


Something similar happened during World War II. When Germany attacked Poland on September 1st, 1939, the Dow opened 10% higher on September 5th. The market suffered a loss when Pearl Harbor was attacked in December 1941, however, it slowly recovered from the losses, and by the end of the war in 1945, the markets were up by about 50% in total from 1939.

Korean War

At the very start of the Korean War, the Dow fell by about 5%. Though again, the market slowly recovered and during the time of the Korean War, the Dow rose about 60% in total for the whole period. A similar story can be shared in relation to the Vietnam War.

The War on Terror

When the terrorist attack on United States soil occurred on 9/11, the entire NYSE saw huge losses. The Dow fell sharply by about 15% shortly after the tragedy occurred. At that point, the economy was already in the midst of a recession, and stocks were on a free fall following the end of the dot-com bubble. Of course, the stock market slowly returned back to normal after several months of reopening trading.

The Common Thread

These examples are only a partial look into recent wartime market trends. As you can see from this retrospective look at history, it’s safe to say that the market’s reaction to any geopolitical crises and wars can be counterintuitive. 

Perhaps most of us assume that war will always affect the stock market negatively, but the reality shows that if it does, it doesn’t usually stick. Though, of course, much of this is owed to governments’ quick action and economic strategizing.

Predicting what will happen with stocks when a war breaks out is difficult, as it’s hard to determine how investors will react to the events happening. Much of the reaction of the market to any event is context-dependent. 

When Do Markets Actually Suffer in Times of War? 

If we take a good look at the past, we can see that markets suffer most during periods of uncertainty, like those we’ve experienced in the last few months and years. In 2015, research conducted by the Swiss Finance Institute concluded that the “prewar” phase and the likelihood of a potential war tend to decrease stock prices. 

At the same time, once the conflict ultimately occurs, the prices of stocks tend to rise. With that said, if a war starts suddenly without a lot of anticipation, it will likely negatively impact the stock market. This phenomenon was named the “war puzzle,” and according to it, there’s no explanation as to why the stocks rose significantly if the war was expected. Additionally, Mark Armbruster from Armbruster Capital Management found that there’s a lot less market volatility in times of war than normal. He came to this conclusion by analyzing the period from 1926 to 2013. 

However, when it comes to the Iran conflict, the reactions of the investors were calmer. In a way, it seems that the market has become used to such events and is now discounting them. Another reason for the calm is perhaps the fact that the U.S. economy has become more immune to energy price swings due to the changing structure of the global oil markets. 

Additionally, after 9/11 and the Financial Crisis of 2008, investors have now seen multiple instances of the stock market recovering from even the biggest economic and geopolitical shocks, and so now, they’re not as worried about these events as before. 

If the conflict with Russia continues, it will ultimately lead to volatile oil markets. Russia is a significant producer of natural gas and oil and has pipelines feeding most parts of Europe. If Russia shuts off the spigot or the infrastructure used for oil transfer suffers significant damage, then that could lead to much higher energy prices. Along with that, interruptions to the ports around the Baltic and Black Seas can create even more problems if grains and other food staples remain stuck at sea. It’s an axiom that wars work out better for the winners as winners write the history. 

The Bottom Line 

Wars always cause uncertainty in all areas of life, and it’s normal to feel stressed about what will happen in the world over the course of the following months and years. Managing your investments in such unpredictable times is extremely difficult, especially if you don’t have a lot of hands-on experience.

That’s why working with a financial planner is one of the best ways to reduce stress and be certain that an expert is taking care of your earnings. At Alpha Wealth Funds, we’ve been working within the complexities of the stock market for decades, so we know how to build a strong portfolio that’s likely to survive unexpected situations, even times of war. So, if you’re looking for a trusted partner on your financial journey, we’re here for you. 

Please feel free to reach out to me on this or any of your investment needs or questions. I may not always have the answers at my fingertips, but I promise I will get them for you. Harvey Sax

Founded in 2010, our services include boutique hedge funds, separately managed accounts, financial planning, estate & trust services, private placements, and in-house concierge services for high net worth individuals, families, and businesses.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. All investments involve risk including the loss of principal.