does the stock market go down during war

A concise, evidence-based guide answering: does the stock market go down during war — covering typical short-term sell-offs, sector winners/losers, cross‑asset moves, historical case studies throug...

2026-01-25 05:03:00

By Alex Carter

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Does the stock market go down during war?

Early in this article we answer the core question: does the stock market go down during war? Investors commonly ask whether armed conflicts cause lasting equity losses, which sectors gain or lose, and how other asset classes typically behave. This guide focuses on U.S. and major global equity indices, sectoral effects, and the cross‑market channels that translate geopolitical conflict into financial market moves. It synthesizes historical studies, institutional reports, and practitioner analysis through mid‑2024 to give a balanced, evidence‑based view.

截至 2024-06-01，据 Investopedia 和 Invesco 等机构的分析报告和市场回顾，研究显示短期的市场动荡和卖盘常见，但长期回报存在显著差异，且往往取决于冲突的规模、经济背景和政策响应。

Summary / Key takeaways

Short answer to the search phrase does the stock market go down during war: often yes in the immediate term, but not always over the medium and long term. Short‑term volatility and risk‑off selling are common at outbreak, while recovery timelines vary.
Typical pattern: an initial spike in volatility and a price pullback for broad indices, a flight to safety (government bonds, gold), and sector rotation toward defense, energy and certain industrials.
Over months and years, equities have historically recovered and in many cases delivered flat‑to‑positive returns during prolonged wartime periods, but performance differs by era, country, and macro context.
Key drivers: uncertainty and higher risk premia; commodity price shocks (especially energy); fiscal and monetary policy responses; and supply‑chain disruptions or sanctions.
For crypto and digital assets, behavior is mixed: sometimes they fall with risk assets, sometimes they show idiosyncratic flows; the market is still evolving.
Practical investor steps: avoid panic selling, maintain diversification, consider rebalancing, and use hedges consistent with your risk tolerance. For crypto exposures, use reputable platforms such as Bitget and Bitget Wallet for custody and trading needs.

Definitions and scope

What counts as "war" or "conflict"

Not all episodes labeled "war" are the same for markets. For clarity, this guide distinguishes:

Full‑scale wars: broad, sustained conflicts involving major mobilization of resources and widespread economic disruption.
Limited interventions or strikes: tactical military actions with bounded geographical scope.
Proxy wars and low‑intensity conflicts: engagements where major powers are not directly at war but support local actors.
Geopolitical tensions and escalations: heightened rhetoric, sanctions, or military posturing that may or may not lead to kinetic conflict.

These distinctions matter because market effects scale with perceived economic disruption, trade and commodity impact, and the risk of escalation. When readers ask "does the stock market go down during war," the expected answer depends on which of these categories a given event falls into.

Which markets are considered

This article centers on major equity indices (S&P 500, Dow Jones Industrial Average, Nasdaq, MSCI World) and on U.S. equity behavior, but it also addresses:

Sector and individual stock impacts (defense, energy, travel).
Other asset classes: sovereign bonds, gold and other commodities, currencies, and cryptocurrencies.
Regional equity markets, including emerging markets exposed to conflict zones.

References draw on broad historical datasets and practitioner notes that compare these asset classes before, during, and after conflict episodes.

Historical patterns and empirical evidence

Research from academic and industry sources provides a mixed but structured picture of how markets respond to war.

Short‑term reactions (days to weeks)

Immediate market reactions usually feature a volatility spike and a risk‑off retrenchment in equities. When hostilities begin suddenly or news surprises markets, index declines of several percent in days are common; in extreme surprise events, initial drops can reach low‑double digits.
Typical mechanics: rapid repricing of expected cash flows, increases in the equity risk premium, and liquidity‑driven selling. The VIX (volatility index) often jumps alongside equity declines.
Historical examples show that the largest immediate moves occur with major, unexpected events. Where conflict risk is anticipated, markets often price expectations earlier, muting the short‑term shock.

(Repeated for SEO: does the stock market go down during war is a frequent concern because the immediate market response is usually negative; the size and duration of that decline depend on surprise, scale, and economic context.)

Medium‑ and long‑term performance (months to years)

Several studies covering conflicts from World War II through modern episodes find that equities often recover within months and can produce positive returns over a war’s full duration. However, results are heterogeneous: WWII showed strong industrial gains tied to mobilization, while other conflicts delivered weaker or mixed long‑term performance.
Important caveat: wartime returns depend heavily on the starting macroeconomic position. For example, if a conflict starts during a global recession, markets may underperform; if a conflict coincides with strong central‑bank support and fiscal stimulus, equities may be buoyed.
Empirical work uses cumulative index returns over defined windows (30 days, 3 months, 1 year, full conflict) and compares against non‑conflict baselines.

Representative datasets and metrics

Researchers track:

Index returns (daily, monthly) for major benchmarks.
Volatility measures (VIX and realized volatility).
Sector returns and dispersion across industries.
Commodity prices (notably oil and industrial metals).
Capital‑flow metrics and sovereign bond yields.

Studies often sample across multiple conflicts (World War II, Korean War, Vietnam, Gulf War, Iraq/Afghanistan, Russia–Ukraine 2022) to extract patterns while noting the risk of overgeneralization.

Mechanisms and economic channels

Understanding why markets move during conflicts helps explain the pattern captured in the question does the stock market go down during war.

Uncertainty and risk premia

Wars raise uncertainty about expected future cash flows and economic growth. Higher uncertainty raises investors’ required return (risk premium), lowering current valuations and driving short‑term equity declines.
Uncertainty also reduces liquidity: some market participants withdraw, amplifying price moves.

Commodity and inflation channel

Conflicts that threaten supply of energy (oil, gas) or agricultural commodities can push commodity prices higher, feeding through to cost pressures and inflation expectations.
Higher inflation prospects influence real earnings and real discount rates, complicating valuations and sometimes pushing yields higher.

Fiscal stimulus and defense spending

Governments often increase defense procurement and may deploy fiscal stimulus during wartime. In certain conflicts, this higher spending can support aggregate demand and benefit defense and industrial sectors.
The net effect on markets depends on whether fiscal stimulus is large enough to offset uncertainty‑driven contraction.

Sanctions, trade disruptions, and supply chains

Sanctions and trade disruptions can impair corporate earnings for specific firms and sectors, and severe supply‑chain disruptions can reduce productivity and raise costs across industries.
Firms with concentrated exposure to conflict zones or sanctioned counterparties face sharper downside.

Sectoral winners and losers

Sectoral rotation is a central channel through which conflicts reshape market leadership.

Common winners

Defense and aerospace: increased government defense budgets can lift revenues and margins for defense contractors.
Energy and commodities: conflicts that threaten production or transit routes often boost oil, gas and commodity prices, benefiting energy firms and commodity exporters.
Cybersecurity: heightened geopolitical tensions can spur spending on digital defense and secure infrastructure.
Infrastructure and logistics: reconstruction needs and increased logistics demand can favor industrials and materials in some episodes.

Common losers

Travel, leisure and hospitality: sectors sensitive to mobility and consumer discretionary spending typically underperform when conflict reduces travel and tourism demand.
Consumer discretionary: broad consumer spending can weaken if uncertainty curtails spending.
Regional banks or equities exposed to conflict zones: local financial markets often see outsized declines during nearby conflicts.
Firms with high import costs or energy intensity: cost pressures can compress margins and depress earnings.

(For readers asking does the stock market go down during war, sector effects mean that while broad indices may fall, some subsectors can outperform materially.)

Other asset classes and cross‑market behavior

Bonds and rates

Initial moves often show a flight to quality: investors buy government bonds, pushing prices up and yields down.
Over longer horizons, if fiscal deficits widen or inflation expectations rise due to commodity shocks, sovereign yields may increase.
Net bond performance therefore depends on the balance between safe‑haven flows and fiscal/inflationary pressures.

Gold and commodities

Gold commonly behaves as a safe‑haven store of value and frequently appreciates when geopolitical risk spikes.
Energy and food commodities react to supply concerns; when conflicts affect producing regions, prices can rise sharply.

Cryptocurrencies

Empirical evidence through mid‑2024 is mixed: cryptocurrencies have sometimes fallen alongside equities in risk‑off episodes, suggesting risk‑asset characteristics; at other times they have attracted flows from investors seeking cross‑border stores of value.
Market structure, liquidity and regulatory developments mean crypto behavior is evolving; therefore, it is unreliable to assume consistent safe‑haven properties.
For trading or custody related to crypto exposures, consider regulated platforms and secure custody solutions (for example, Bitget and the Bitget Wallet) and maintain awareness of market liquidity.

Case studies

Historical episodes provide concrete illustrations of the patterns above.

World War II

Market behavior: initial volatility but strong long‑term returns for industrialized economies that ramped production.
Drivers: massive fiscal mobilization, industrial conversion to wartime production, and postwar reconstruction.
Takeaway: when conflict coincides with large fiscal and industrial shifts, certain equity sectors can benefit significantly.

Korean and Vietnam Wars

Market behavior: mixed short‑term moves; during some periods equities held up as U.S. economic expansion continued.
Drivers: war spending was significant but often accompanied by other macro factors (monetary policy, domestic demand) shaping outcomes.

Gulf War (1990–1991)

Market behavior: an initial negative reaction followed by a rapid recovery once uncertainty about broader escalation declined.
Drivers: the clarity of objectives and a relatively brief duration helped markets rebound.

Iraq/Afghanistan campaigns (2001–2011, 2003–2010)

Market behavior: varied impacts across timeframes; conflicts were long but markets were also influenced by domestic macro cycles and the 2008 financial crisis.
Drivers: complex mix of defense spending, oil price swings, and global macro shocks.

Russia–Ukraine invasion (2022)

Market behavior: sharp immediate volatility in global equities, energy price spikes, and sectoral strength in energy and defense equipment; many global indices recovered in weeks–months after initial shock, though regional markets remained under pressure.
As of 2024-06-01, several institutional reviews noted that this episode reaffirmed common patterns: immediate risk‑off, commodity price pressures, and ongoing sector rotation.

Recent regional conflicts

Market behavior: localized effects—nearby regional markets and sensitive sectors see larger moves, while distant markets often show transient reactions.
Takeaway: the spatial dimension matters; investors in markets close to conflict zones face higher direct risks.

Investor implications and recommended responses

This section is practical and evidence‑based, but remains neutral and non‑prescriptive. It does not offer specific investment recommendations.

Avoid panic selling and focus on long horizon

Historical patterns show that indiscriminate selling at the onset of conflict can lock in losses and miss recoveries. Investors with long horizons who maintain asset allocation discipline often fare better.
The repeated reality is that initial declines are often followed by recoveries once uncertainty resolves or policy responses arrive.

Diversification and rebalancing

Diversification across asset classes (equities, bonds, commodities), geographies, and sectors reduces the risk of concentrated losses.
Rebalancing enforces buy‑low/sell‑high discipline: when equities fall, rebalancing can prompt purchases at lower prices within a long‑term plan.

Tactical ideas (with cautions)

Some investors consider tactical exposure to defense, energy, or commodities during heightened geopolitical risk, but timing is difficult and sector rallies can be short‑lived.
Hedging (options, protective strategies) can reduce downside but carries cost; suitability depends on investor objectives and time horizon.
For cryptocurrency investors seeking regulated trading or custody during volatile geopolitical periods, use established platforms like Bitget and secure self‑custody options such as Bitget Wallet.

Tail risk planning and risk tolerance

Align portfolio construction with liquidity needs and risk tolerance. Retirees or liquidity‑constrained investors may prefer higher bond allocations or explicit hedges.
Institutional investors often maintain stress‑testing and scenario analysis considering geopolitical shocks; retail investors can replicate some of this thinking at a basic level.

Limitations, caveats, and why "history may not repeat"

Each conflict is unique in scale, duration, geographic footprint, and economic context. Market structure has also evolved: algorithmic trading, larger central‑bank balance sheets, and more integrated supply chains mean future reactions may differ from past patterns.
Data limitations: some historical studies compare conflicts across eras with vastly different economies; caution is needed in extrapolating.
Geopolitics interacts with macro conditions. A conflict during an economic expansion looks different from one that begins during a recession or a period of financial stress.
As a neutral guidance point: historical patterns inform probabilities, not certainties. Investors should combine historical insight with real‑time analysis and personal risk constraints.

References

Investopedia — Impact of War on Stock Markets: Investor Insights and Trends. (Institutional overview and data summaries.)
The Motley Fool — Wartime and Wall Street: How War Affects the Stock Market. (Historical analysis.)
Invesco — Markets in War Time. (Report reviewing sectoral and market outcomes in wartime.)
Mauldin Economics / RiskHedge — Here's how stocks historically perform during wars. (Research note.)
IG — How war affects markets and trading opportunities during global conflicts. (Market commentary.)
Investment Office — Stock Markets during the second World War. (Historical study.)
Nedbank Private Wealth — How war affects markets. (Practitioner note.)
BearSavings — How War Affects Stock Market Prices. (Educational article.)
Vericrest Private Wealth — What happens to the stock market during a war? (Wealth management viewpoint.)
The Plain Bagel (YouTube) — The Impact of War on Markets and the Economy. (Educational video as of 2024.)

(Note: citations here list source titles and publishers; no external URLs are provided in compliance with platform rules.)

Practical next steps for readers

If you are reviewing your portfolio or researching the question does the stock market go down during war, consider the following neutral checklist:

Review your time horizon and liquidity needs.
Check asset allocations across equities, bonds, and commodities.
Assess sector and regional concentrations and consider diversification or rebalancing rules.
If holding crypto exposures, evaluate custody and counterparty risk; consider regulated platforms and self‑custody tools such as Bitget and Bitget Wallet for trading or storage needs.
Use scenario analysis or simple stress tests to see how a severe commodity shock or regionally concentrated disruption could affect your holdings.

For further learning, explore institutional reports from reputable research providers and maintain a disciplined approach to any tactical moves.

Final notes and reader guidance

The direct question does the stock market go down during war captures a realistic investor concern. The evidence compiled through mid‑2024 shows consistent short‑term downside risk and volatility at conflict onset, combined with varied medium‑ and long‑term outcomes. Sectoral winners and losers are predictable to some extent, but timing and scale are uncertain. Historical patterns provide probabilistic guidance, not deterministic rules. Readers should combine historical context with their personal financial situation and consult qualified advisors for tailored decisions.

Explore more market research and secure trading/custody options on Bitget. For crypto trading or wallet needs, consider Bitget and Bitget Wallet as part of a risk‑aware approach.

The content above has been sourced from the internet and generated using AI. For high-quality content, please visit Bitget Academy.