do stocks go up during war? A guide

Do stocks go up during war? Historically, equity markets often fall and become volatile at the outbreak of conflicts but have frequently recovered and generated positive returns over medium to long...

2025-11-02 16:00:00

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Do Stocks Go Up During War?

As of June 2024, according to reports and reviews from sources such as Invesco, Motley Fool, Forbes and academic event‑study literature, a concise answer is: do stocks go up during war? Not reliably in the immediate hours or days after a conflict starts — markets commonly see sharp volatility and short-term declines — but over medium to long horizons many equity markets have recovered and delivered positive returns. The magnitude and direction depend on the scale and location of the conflict, the economic backdrop, policy responses, and which industries or countries are directly affected.

This guide lays out definitions and scope, summarizes historical evidence and representative quantitative examples, explains economic channels, describes asset-class and sector behavior, provides investment implications and risk caveats, and points to methods researchers use. It is written for investors and curious readers who want a practical, neutral, data-aware overview. If you trade or hedge around geopolitical events, Bitget exchange and Bitget Wallet offer execution and custody options that align with the strategies discussed below.

Definitions and scope

Before answering "do stocks go up during war?" clearly, we need common definitions.

"War": in this article we use a broad operational definition that includes large interstate wars, limited invasions, prolonged occupations, and proxy conflicts that generate measurable economic and market consequences. We do not take positions on political causes or moral judgments; the term is used for financial and historical analysis only.
"Stocks": we refer to broad equity market indices (e.g., large‑cap benchmarks such as the S&P 500), sectoral equity groups (defense, energy, travel), and country‑level exchanges. Individual company performance may diverge substantially from index patterns.
Time horizons: researchers and investors typically look at multiple windows — intraday and days around an outbreak (short term), 1–12 months (medium term), and multiple years (long term). The answer to "do stocks go up during war?" varies by the horizon chosen.

Key framing points:

Immediate market moves are driven mainly by uncertainty and risk repricing.
The medium/long‑term direction often depends on fiscal response, supply disruptions, and whether the conflict escalates or resolves.

Historical evidence — aggregate patterns

A wide set of empirical reviews and industry summaries find common cross‑conflict patterns relevant to the question "do stocks go up during war?":

Outbreak effect: major conflicts typically trigger an initial spike in volatility and an immediate risk‑off response; equity prices often drop in the days surrounding the first major escalation or verified attack.
Rapid rebounds: partial or full rebounds often follow once the situation becomes clearer, combatants’ objectives and timelines are perceived, and policy responses (fiscal, monetary, trade) are put in place.
Medium/long‑term resilience: over 6–36 months many broad equity markets historically delivered positive returns following conflicts, particularly when the starting economic conditions were not already a deep recession.
Variation by conflict: the size, geographic scope, and economic exposure determine outcomes — global wars have different effects than brief localized operations.

Industry and academic summaries that reach these conclusions include work by Invesco (education series on wartime markets), Motley Fool retrospective pieces, Forbes analyses, Mauldin Economics reviews, and event‑study research summarized by investment houses and academic journals. These sources converge on the qualitative pattern but note large dispersion across episodes.

Quantitative examples by conflict

Representative bullets addressing "do stocks go up during war?" with conflict examples:

World War II era (1939–1945): U.S. equities experienced major wartime disruptions early on but over the entire 1940s the U.S. market experienced multi‑year returns driven by wartime production and postwar recovery. (Historical series show cumulative gains across the 1940s, though precise index comparisons depend on the chosen start and end points.)
Korean War (1950–1953): Equities fell at the start in 1950 but recovered in the months thereafter as defense spending and Cold War industrial demand rose.
Vietnam era (1955–1975, with major U.S. engagement in the 1960s): markets showed episodic volatility; sectoral shifts favored defense and industrial suppliers, while consumer confidence and some domestic sectors were pressured in specific years.
Gulf War (1990–1991): The coalition victory and quick conflict resolution correlated with a marked market rebound after an initial drop; investors often cite the short, decisive character and subsequent energy supply clarity as drivers for the rapid recovery.
Iraq / Afghanistan period (2001–2011 and post‑2003 invasion): Markets experienced early 2000s recession and the 2008 financial crisis — disentangling conflict effects is complex; however, defense and energy suppliers often outperformed in specific windows.
Russia–Ukraine (2022 onward): In early 2022 markets dropped sharply amid heightened uncertainty and commodity shocks; the calendar year 2022 was a difficult one for global equities (the S&P 500 finished the year down nearly 20%), influenced strongly by rising inflation and monetary tightening in addition to the conflict. Later, as the macro picture and corporate earnings outlook clarified, markets staged recoveries in subsequent months and sectors tied to energy and commodities experienced relative strength.
Israel–Gaza escalations (2023): localized market uproar and short‑term sector rotation were visible; broader global indices showed limited lasting damage beyond initial volatility.

Note: specific percentage moves and durations vary by index, measurement window, and selection of event dates. Researchers caution against attributing post‑conflict returns to the conflict alone without controlling for contemporaneous macroeconomic factors.

Mechanisms and economic channels

Understanding why "do stocks go up during war?" sometimes yields an affirmative answer in the medium term requires accounting for economic transmission channels:

Fiscal stimulus and government procurement: Wars often prompt large government spending increases (defense procurement, reconstruction). This can lift revenues and cash flows for defense contractors, industrial suppliers, and certain service providers.
Resource reallocation: Private investment and labor shift toward sectors deemed strategic, boosting production for those industries.
Commodity price effects: Disruptions to supply chains (especially energy and metals) can push commodity prices higher; energy producers and materials companies often benefit while energy‑importing economies can be harmed.
Inflation and monetary response: Supply shocks can be inflationary; subsequent central bank responses (rate hikes or accommodation) materially affect asset valuations and may either amplify or offset equity returns.
Uncertainty resolution and insurance of expectations: Once ambiguous outcomes are clarified — a quick victory, stable supply chains, or robust policy support — risk premia shrink and equities can rally.
Technological acceleration: Conflicts historically have accelerated certain technologies (aviation, communications, logistics) that later create commercial opportunities.

These channels illustrate why markets do not respond uniformly: fiscal and commodity effects can lift some sectors while pressuring others, and central bank reactions can dominate equity valuations during periods of rapid inflation or tightening.

Asset‑class and sector responses

How do different asset classes typically behave in wartime?

Equities: common pattern is short‑term drops and elevated volatility, with diversified indices often showing resilience and, in many historical episodes, positive medium/ to long‑term returns once uncertainty abates.
Government bonds: high‑quality sovereign bonds often act as safe havens during the initial shock, compressing yields. However, sustained fiscal spending and inflationary pressure can push yields higher over time, producing mixed returns.
Gold and other safe havens: gold and select commodities often rise as investors seek stores of value or hedge against inflation and currency risk.
Oil and energy: prices typically spike when supply routes or producing regions are threatened, benefiting energy equities in the near term.

Sector winners

Sectors that historically outperform during or after conflicts include:

Defense and aerospace: direct beneficiaries of increased procurement and modernization.
Energy and materials: firms exposed to oil, gas, metals commonly outpace the market when supply risks or price inflation occur.
Industrials and heavy manufacturing: companies supplying logistics, transport, and machinery often see higher demand.
Cybersecurity and communications: modern conflicts highlight cyber risks and secure communications, lifting demand for private‑sector solutions.

Sector losers

Sectors that often underperform include:

Travel, leisure and tourism: airlines, hotels, and discretionary services face immediate demand shocks and prolonged recovery uncertainty.
Consumer discretionary in affected regions: staples may remain stable but discretionary spending can fall in conflict‑affected zones.
Firms with concentrated exposure: companies with significant operations or revenues in directly affected countries, or those subject to sanctions, can suffer outsized losses.

Short‑term versus long‑term effects

Time horizon matters when answering "do stocks go up during war?":

Short term (days to weeks): volatility and risk‑off flows are the norm; many investors reduce equity exposure and seek safe havens.
Medium term (1–12 months): outcomes depend on conflict duration and policy clarity; equity rebounds are common once markets can price likely scenarios.
Long term (multiple years): structural effects — reconstruction, persistent defense budgets, technological adoption, and commodity price regimes — can support sustained gains in select sectors and in broad markets if the global economy remains intact.

Investor takeaway: horizon alignment is crucial. Tactical moves can out‑ or underperform buy‑and‑hold strategies depending on timing and message clarity.

Cross‑country and conflict‑specific differences

Whether stocks in a particular country rise or fall during a conflict depends on the country's role and economic structure:

Belligerent countries (directly involved): typically face larger initial market dislocations, capital flight risk, and potential sanctions; equities in these markets often underperform in the outbreak window.
Suppliers and allies: countries that supply energy, arms, or logistics to combatants may see sector gains and steadier equity performance.
Neutral countries: outcomes depend on trade exposure and financial linkages; some safe‑haven jurisdictions may attract capital inflows.

Other differentiators: economic size, external debt levels, currency reserves, energy dependence, and openness to trade all shape market responses.

Role of macroeconomic and policy context

The macro state at conflict outset heavily conditions market outcomes:

Expansionary vs recessionary baseline: wars that start in expansions are likelier to see quicker recoveries and less systemic disruption than those beginning during deep recessions.
Monetary policy stance: tight monetary policy can magnify the impact of war‑related supply shocks, increasing recession risks and pressuring equities.
Fiscal capacity: countries with strong fiscal space can cushion shocks through spending; limited fiscal room raises default and sovereign risk concerns.

Put simply: wars interact with preexisting macro conditions; you should not treat conflict as an isolated shock when evaluating markets.

Empirical methods, indices and studies

Researchers use a variety of approaches to evaluate the question "do stocks go up during war?":

Event studies: examine price and volatility behavior in short windows (days to weeks) around a defined event date (invasion, declaration, major escalation).
Cross‑sectional analyses: compare returns across countries or sectors to identify winners and losers.
Time‑series regressions: control for macro variables (GDP growth, inflation, interest rates) to isolate conflict effects.
Common indices and measures: S&P 500, MSCI country and sector indices, Geopolitical Risk Index (GPR), and volatility indices (e.g., VIX) are frequently used.

Methodological caveats include event dating (when is a war "started"?), survivor bias (countries and firms that vanish from datasets), and confounding contemporaneous shocks (financial crises, pandemics).

Investment implications and strategies

What should investors consider given the typical patterns answering "do stocks go up during war?":

Align time horizon: short‑term trading around outbreaks is high‑risk; long‑term investors often benefit from staying invested and rebalancing.
Maintain disciplined allocation: avoid panic selling; use pre‑defined rebalancing rules to buy weakness if appropriate.
Sector rotation: consider overweighting historically defensive or beneficiary sectors (defense, energy, materials) only as part of a diversified plan and after conducting due diligence.
Hedging: use options, high‑quality bonds, or gold to hedge downside risk. For active traders, liquid derivatives and equities on a regulated venue like Bitget (for supported instruments) can help implement strategies.
Geographic diversification: consider country risk exposure. Bitget Wallet can be used to custody digital assets while pursuing multi‑asset strategies.

Important compliance and ethical notes: this is informational analysis, not individualized investment advice. Investors should combine this framework with their own risk tolerance and constraints.

Risks, caveats and tail scenarios

Key warnings when considering whether "do stocks go up during war?":

Past performance is not a guarantee of future results; historical patterns can fail when a conflict escalates into a systemic shock.
Tail risks: escalation to involve major economies, disruption of global payment systems, or use of weapons of mass destruction could cause extreme negative outcomes.
Data limitations: historical samples vary in quality and selection; attribution is challenging when wars coincide with other shocks.
Ethical considerations: investment decisions around conflicts raise moral questions beyond financial return; those choices are personal and sometimes regulated.

Policy, market structure and modern differences from past wars

Modern conflicts differ from many 20th‑century wars in ways that affect market responses:

Globalized supply chains: faster, but also more connected, meaning localized disruptions can propagate quickly.
Energy independence shifts: some economies today are less dependent on single sources of energy, changing exposure to supply shocks.
Central bank credibility and policy tools: modern central banks often act swiftly to stabilize markets, sometimes muting long‑term damage to equities.
Rapid information flow: 24/7 news and social media accelerate price discovery and can increase intraday volatility.
New domains: cyber and space operations create novel economic exposures (cybersecurity demand, satellite services).

These structural changes imply that responses seen in older conflicts may not map one‑for‑one to modern incidents.

Case studies and timelines

Below are concise, neutral case timelines illustrating variability in market responses to conflicts (dates are event anchors; listed effects are descriptive and avoid political detail):

Pearl Harbor / U.S. entry to WWII (December 1941): markets reacted to the major escalation with shock and closure decisions; over the subsequent war years the U.S. economy mobilized, and broader equity performance reflected production shifts and postwar recovery dynamics.
Gulf War (August 1990–February 1991): immediate market sell‑offs occurred after the invasion of Kuwait; once the coalition response clarified likely outcomes and energy supply stabilized, markets staged a pronounced rebound.
Iraq invasion (March 2003): markets showed initial volatility; investor reaction was influenced by oil price expectations and macro policy; specific defense and energy stocks outperformed in select windows.
Russia–Ukraine (February 2022 onward): in Feb 2022 major equity indices dropped amid geopolitical uncertainty and commodity price shocks. The calendar year 2022 saw a difficult environment for equities, driven by high inflation and central bank tightening in addition to the conflict; subsequent months saw partial market recovery as macro conditions and corporate results clarified.

These timelines show that timing, policy response, and supply effects matter more than the mere fact of hostilities when interpreting whether "do stocks go up during war?" for a specific investor.

How researchers measure "benefit" to stocks

Common metrics used to judge whether stocks "benefit" from war include:

Absolute returns: price change for an index or stock over specified windows (e.g., 30 days, 12 months).
Excess returns: relative returns versus a benchmark or historical average to isolate conflict impact.
Volatility and drawdown duration: how deep and prolonged are losses?
Sectoral contribution: which sectors drive index performance post‑event?

Interpreting these metrics requires controlling for contemporaneous macro factors and selection effects.

Frequently asked questions (FAQ)

Q: Should I sell my equities before a war breaks out? A: Predicting outbreaks is extremely difficult and market timing is risky. Historically, short‑term volatility is common, but many long‑term investors who stayed invested or rebalanced benefited later. Align decisions to your risk tolerance.

Q: Do defense stocks always go up during conflicts? A: Not always. Defense companies may outperform in many conflicts, but company‑level fundamentals, contract timing, and political decisions matter. Outperformance is context dependent.

Q: Are bonds or gold better hedges? A: Both have played hedge roles historically. High‑quality sovereign bonds typically offer immediate safe‑haven demand, while gold can hedge inflation and currency risk. The choice depends on the specific risk you want to mitigate.

Q: How long do downturns typically last? A: There is no fixed duration; some initial sell‑offs resolve in weeks, others correlate with extended geopolitical or macroeconomic stress and can last months or longer.

References and further reading

This article synthesizes industry reports and empirical studies. Selected sources include education and research series from Invesco, retrospective articles from Motley Fool, Forbes analyses, Mauldin Economics reviews, event‑study literature summarized by investment houses, and cross‑sector roundups from investment research outlets. Readers seeking primary studies should consult peer‑reviewed event studies and the Geopolitical Risk Index literature for technical methodologies.

As of June 2024, these institutions and publications provided accessible overviews and historical compilations that informed the patterns described above.

Notes on methodology and limitations of this article

This guide synthesizes historic studies, market commentary and industry analyses to present patterns and practical implications. It is informational and neutral in tone. Results vary substantially by conflict, sample selection and measurement windows. The article does not provide individual investment advice. For trade execution, Bitget exchange and Bitget Wallet can provide custody and trading tools aligned with the strategies discussed here.

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