How have stock markets reacted to war in the past?

The recent market volatility over Ukraine has got people thinking – how have stock markets reacted to war in the past?

I decided to look at major conflicts such as the World Wars, as well as more minor conflicts.

Let’s use the S&P500 as our reference point

The Second World War in Europe started in 1939

The S&P500 fell by over 20% in the coming three weeks, and 25.8% after the attack on France by Germany.

One year after the Nazi’s invasion of Czechoslovakia, most of the dip had been eliminated, after the market climbed by 19%.

Despite this, this is a relatively unusual situation. Historically, markets have recovered within six months of a war, and seldom are markets lower a year after the event.

The S&P500 dropped 11% in a single day after the Pearl Harbour bombings bought the US into World War Two.


A year later, the market was up by over 15%, eliminating all the falls.

In the case of numerous other events, markets have fallen by small amounts and even went up.

When Russia-Ukraine blew up in 2014, the markets were down 2% for a few days, and up 13.69% for the year as a whole.

After the Soviet Union took Afghanistan in 1979, which was a huge event at the time, markets fell 3.8% but came back strongly.

The Cuban Missile Crisis was arguably the most dangerous period in living memory because nuclear war would have ended humanity.

It took markets only 18 days to recover from that event. 

In total, here is how many days it took markets to recover from various wars and threats of war

  • Pearl Harbor – 307 days
  • Iraq’s invasion of Kuwait – 189 days
  • Yom kipper war – 6 days
  • The six-day war of 1967 – 2 days.
  • Cuban Missile crisis -18 days

Last week, the S&P500 was very volatile, but ended at 0%, with the FTSE and many major markets only down by 0.20%.

Even German and French markets, much more exposed to Russia, only fell by 2%-3% for the week. Given the above trends, this should hardly be a surprise.

The takeaway from the historical data is that geopolitics tends to not really influence stock markets medium-term, even if there is short-term volatility.

The markets even went up during World War One, which happened during the same time as the Spanish Flu crisis, despite the falls in the middle.

It should therefore not be a surprise that many professional investors are seeing the current falls as a buying opportunity.

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Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 438.5 million answers views on Quora.com and a widely sold book on Amazon

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