What History Tells Us: Wars and Markets
Geopolitical events can be unsettling, but they are not new, and markets have developed a fairly consistent way of digesting them over time. Looking back at several past conflicts provides useful context for understanding what we are seeing today.
The Gulf War (1990–1991)
When Iraq invaded Kuwait on August 2, 1990, oil prices spiked 11.6% on day one and surged nearly 57% over the next 30 days, rising from about $20 to $39 per barrel. The S&P 500 fell 1.1% on the first day and declined more than 10% over the following month, but the U.S. economy was already weakening due to the savings and loan crisis, so a significant portion of the stock market decline reflected economic fragility rather than the conflict alone.
Once U.S.-led coalition forces launched Op. Desert Storm in January 1991 and it became clear that oil infrastructure would be protected, the war risk premium in oil prices collapsed almost overnight and crude fell sharply. The stock market bottomed before the conflict ended and rallied strongly into 1991.
The Iraq War (2003)
By the time the U.S. invaded Iraq in March 2003, markets had largely priced in the conflict. Oil actually fell from $36 to roughly $26 within two weeks of the invasion as the “uncertainty premium” evaporated once the campaign began. The S&P 500 rose about 2.4% in the month following the invasion and continued higher through the rest of the year as the initial military campaign unfolded swiftly.
The lesson for today: Markets price in uncertainty more than they price in bad news. When the trajectory of a conflict becomes clearer—through a ceasefire, diplomacy, or a definitive military outcome—risk premiums often unwind quickly.
Russia’s Invasion of Ukraine (2022)
After Russia invaded Ukraine in February 2022, the S&P 500 fell more than 7% in the following weeks, while oil surged above $100 per barrel. Yet within one month, the S&P 500 had recovered and traded back above pre‑invasion levels, even while oil remained elevated.
The Pattern: First Week and Beyond
The following captures how the S&P 500 index behaved after the initial events over various time horizons.
S&P 500 Returns Around Major Conflicts
| Date |
Conflict |
1 Week |
30 Days |
90 Days |
180 Days |
1 Year |
| October 29, 1956 |
Suez Crisis |
1.2% |
-3.2% |
-3.0% |
-1.8% |
-12.9% |
| July 15, 1958 |
Lebanon Crisis |
2.9% |
6.0% |
13.9% |
22.8% |
32.0% |
| April 17, 1961 |
Bay of Pigs |
-3.4% |
0.6% |
-2.7% |
2.2% |
1.4% |
| August 7, 1964 |
Gulf of Tonkin |
1.3% |
0.1% |
4.0% |
6.1% |
9.0% |
| February 11, 1979 |
Iranian Rev. |
0.9% |
1.8% |
0.7% |
7.8% |
20.4% |
| October 25, 1983 |
Grenada |
-1.7% |
0.3% |
0.0% |
2.6% |
-1.1% |
| April 14, 1986 |
Libya Airstrikes |
3.1% |
10.3% |
8.2% |
15.0% |
20.4% |
| December 20, 1989 |
Panama |
1.7% |
-1.4% |
0.2% |
5.9% |
-3.7% |
| January 17, 1991 |
Desert Storm |
2.1% |
11.0% |
11.0% |
18.2% |
16.6% |
| December 5, 1992 |
Somali Civil War |
1.1% |
1.3% |
4.1% |
5.6% |
7.7% |
| March 30, 1995 |
Bosnian War |
1.6% |
4.9% |
8.4% |
11.8% |
23.1% |
| March 24, 1999 |
Kosovo War |
1.4% |
7.1% |
6.3% |
5.3% |
18.3% |
| October 7, 2001 |
Afghanistan |
1.9% |
2.9% |
8.9% |
5.1% |
-25.3% |
| March 19, 2003 |
Iraq War |
0.8% |
1.7% |
15.5% |
15.6% |
27.0% |
| March 19, 2011 |
Libyan Civil War |
2.8% |
3.6% |
-0.5% |
-6.7% |
1.5% |
| September 22, 2014 |
ISIS |
0.8% |
2.7% |
4.3% |
0.4% |
0.3% |
| February 24, 2022 |
Ukraine |
1.7% |
5.4% |
-1.8% |
-3.5% |
-6.4% |
| January 3, 2026 |
Venezuela |
1.1% |
1.4% |
TBD |
TBD |
TBD |
| February 28, 2026 |
Iran War |
-1.1% |
TBD |
TBD |
TBD |
TBD |
Across these conflicts, the S&P 500 has, on average, delivered modestly positive returns even in the short term and more meaningfully positive returns over longer horizons.
+1.2% over the first 7 days.
+3.2% in the first 30 days.
+4.6% in the first 90 days.
+6.6% in the first 180 days.
+7.5% over the first year.
The key takeaway: Selling into geopolitical fear has historically been a poor long‑term decision.
Three Possible Paths from Here
Scenario 1 - Swift Resolution (Most Favorable)
1. The conflict remains confined; S&P 500 could recover recent losses within weeks or months.
Scenario 2 - Extended but Contained Conflict (Base Case)
2. Operations continue for 4–6 weeks; oil remains in the $80–$95 range; 3–6% drawdown potential.
Scenario 3 - Escalation and Prolonged Disruption (Tail Risk)
3. Conflict spreads; oil surges past $100; economy edges toward stagflation.
What Are We Focusing on Now
- No wholesale changes: Drawdowns of 1–5% remain within normal market fluctuations.
- Monitoring fixed income: Evaluating opportunities in shorter‑duration bonds.
- Watching the U.S. dollar: Tracking currency effects on international returns.
- Watching the Strait of Hormuz: Even modest disruptions to shipping through this critical chokepoint can materially affect global oil supply and pricing. Given oil’s outsized influence on inflation, growth expectations, and investor sentiment, developments there represent the most significant market transmission channel of the current conflict.
- Staying close to the data: Monitoring upcoming CPI and jobs reports for signs of inflation persistence or labor cooling.
Our Message to Investors
Periods of global conflict often bring heightened volatility and emotional decision‑making, but history consistently shows that disciplined investors who stay the course are rewarded over time.
At Vistamark Investments, we remain focused on fundamentals, valuation, and data—not headlines.
Our proprietary VistaBuilder™ and VistaBalancer™ systems allow us to monitor market dynamics in real time, test scenarios, and rebalance portfolios efficiently as new information emerges. These tools integrate quantitative signals with qualitative judgment, enabling us to respond strategically rather than reactively.
We are actively assessing risks and opportunities across asset classes, including fixed‑income securities offering attractive yields and international positions influenced by currency shifts. Yet we are equally mindful of maintaining proper diversification and liquidity to protect client capital.
Staying invested during times of uncertainty is rarely comfortable, but it has historically been effective. We continue to emphasize patience, evidence‑based decision‑making, and adherence to each client’s long‑term strategy.
Matthew Rice, CFA, CAIA
Managing Partner, Chief Investments Officer
mrice@vistamarkllc.com
312-895-3001
