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How Does War Affect the Stock Market
Mar 13, 2025
War can alter our economy instantly, and this swift change can leave investors reeling. For instance, when Russia invaded Ukraine in February 2022, the stock market plummeted. Crude oil prices hit their highest level since 2014, and inflation fears ran rampant. Even as war raged half a world away, investors were left to assess the damage on US stocks.
Though the economy was emerging from a pandemic-induced recession, the geopolitical tensions highlighted today’s markets' interdependence. These swift changes can be alarming, but they don't have to be. This guide will explain how war impacts the stock market, helping you make informed decisions as volatility strikes due to economic interdependence. One way to prepare for sudden changes in stock performance is to keep up with the latest economic news. GoMoon’s AI-powered economic calendar can help you track important events that impact the stock market so you can stay ahead of the curve.
Table of Contents
The Relationship Between War and Financial Markets
War immediately impacts stock markets, with rising uncertainty leading to investor panic. Geopolitical uncertainty makes markets volatile. Investors fear economic slowdowns, increased inflation, disrupted trade, and changes in government policy. Many investors exit riskier assets (stocks, cryptocurrencies) and move into safe-haven assets (gold, bonds, commodities). When Russia invaded Ukraine in February 2022, the global stock market experienced a sharp sell-off, with the S&P 500 dropping over 8% in a month.
Inflationary Pressures and Rising Interest Rates
Wars often lead to higher government spending on military efforts, increasing demand for raw materials and energy. Disruptions in supply chains (such as oil and agricultural goods) cause inflation to rise, which forces central banks to increase interest rates. Higher inflation and interest rates hurt stock markets by reducing corporate profit margins and consumer spending. The Yom Kippur War (1973) led to an oil embargo, causing crude oil prices to quadruple and leading to stagflation (high inflation + low growth) in Western economies.
Impact on Trade and Globalization
Wars can disrupt international trade routes, affecting companies that rely on global supply chains. Economic sanctions imposed during wars can hurt multinational corporations and reduce global trade. Export-dependent economies suffer more than domestic-focused businesses. The U.S.-China trade war in 2018-2019 caused significant stock market volatility, as tariffs on Chinese goods hurt U.S. companies that relied on Chinese manufacturing.
Historical Patterns: How Wars Have Moved Markets in the Past
Markets tend to follow a three-phase reaction to war. First, in the pre-war period, stock markets were highly volatile as investors anticipated the likelihood of war. Military stocks (defense companies) often rise in anticipation of increased government spending. Energy stocks rally if the war threatens oil supply chains. Next, the war breaks out: Initial stock market sell-offs occur due to fear and uncertainty. Investors rush into gold, bonds, and defensive stocks. Governments increase defense budgets, boosting aerospace and military industries. Finally, there is a post-war recovery or economic shock. If the war is short and does not disrupt global supply chains, markets recover quickly. If the war leads to inflation, economic recessions, or high debt burdens, market declines may persist for years.
Key Examples of War-Driven Market Movements
World War II (1939-1945)
Initial panic selling occurred when Germany invaded Poland in 1939. The market rallied long-term as U.S. defense spending fueled economic recovery. The Dow Jones Industrial Average gained 50% from 1942 to 1945 as wartime production created jobs.
Lessons for Traders
Defense, energy, and industrial stocks outperform during war. Consumer discretionary and luxury stocks underperform as spending shifts to necessities.
Vietnam War (1955-1975)
In the 1970s, high inflation and government debt due to wartime spending, as well as weak economic growth and stock market stagnation, contributed to the problems.
Lessons for Traders
Prolonged conflicts with economic mismanagement lead to long-term market weakness. High inflation reduces real stock market gains.
Russia- Ukraine War (2022- Present)
Global markets fell sharply as the war led to energy supply shocks and rising inflation. Gold, oil, and defense stocks surged as investors sought inflation hedges.
Lessons for Traders
Wars involving major energy producers cause oil price spikes and inflation risks. Safe-haven assets perform well during war-related uncertainty.
How Traders Can Navigate War-Driven Market Volatility with GoMoon.ai
War-driven market swings create opportunities for traders who track geopolitical risks, market sentiment, and economic trends in real time. AI-powered platforms like GoMoon.ai provide a competitive edge by tracking real-time war events. AI algorithms monitor global conflicts and breaking news that affect markets. Traders receive instant alerts on geopolitical escalations and their expected market impact. Historical replay tools allow traders to study past conflicts and how they influenced stock markets. It helps traders identify patterns in sector performance during wars. AI-powered event impact scores assess the severity of war-related stock market risks on a scale of 1-10.
This helps traders determine whether to hedge, exit, or enter positions based on risk assessment. Sector performance analysis during war periods identifies which sectors (defense, commodities) benefit most. It predicts which industries may suffer prolonged declines due to supply chain risks. Volatility tracking and risk management features track VIX (Volatility Index) trends, allowing traders to capitalize on war-driven panic selling. Custom alerts notify traders about potential market corrections or rebounds.
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How War Impacts Stock Market Performance
Market Reaction at the Start of a Conflict
Investors rush to protect their portfolios when war breaks out, often selling off riskier assets. Global markets experience sharp declines as uncertainty dominates investor sentiment—volatility spikes, with the VIX (Volatility Index) surging as war-driven fear spreads.
Panic Selling and Volatility in Response to War News
Investors rush to protect their portfolios when a war breaks out, often selling off riskier assets. Global markets experience sharp declines as uncertainty dominates investor sentiment—volatility spikes, with the VIX (Volatility Index) surging as war-driven fear spreads.
Example
Russia- Ukraine War (February 2022) The S&P 500 dropped nearly 8% in a month following the invasion. Oil prices surged to over $100 per barrel, creating inflation concerns. Investors moved into gold and U.S. Treasury bonds to hedge against uncertainty.
The Flight to Safe Haven Assets
Investors tend to shift capital into safer investments that hold value during crises. Gold, U.S. government bonds, and defensive sector stocks (healthcare and consumer staples) perform well.
Safe-Haven Assets That Gain Value in Wars
Gold (GLD, IAU ETFs) – Considered a store of value in uncertain times.
U.S. Treasury Bonds – Investors seek security in government-backed assets.
Swiss Franc (CHF) and Japanese Yen (JPY) – Strengthen as global investors shift into lower-risk currencies.
Example: During World War II, gold prices rose as investors sought protection from currency devaluation and war-driven inflation.
Long-Term Market Effects of Prolonged Conflicts
In the long term, wars can devastate economies and disrupt global trade, leading to higher prices and reduced corporate profits.
War-Driven Inflation and Commodity Price Surges
Wars disrupt supply chains for key commodities like oil, gas, and agricultural products. As raw material shortages increase production costs, inflation rises sharply. Central banks may raise interest rates to counter inflation, further slowing stock market growth. Example: 1973 Yom Kippur War & Oil Crisis The OPEC oil embargo quadrupled oil prices in months. Inflation in the U.S. surged to over 12%, leading to a severe economic downturn. The S&P 500 dropped 48% between 1973 and 1974, entering a bear market.
The Impact of War on Interest Rates and Economic Growth
Governments increase military spending, often leading to higher national debt. If inflation rises too fast, central banks raise interest rates, making borrowing more expensive. High interest rates reduce corporate profits and slow down economic growth. Example: Vietnam War (1955-1975) Increased government borrowing led to higher inflation and interest rates. The Dow Jones stagnated in the 1970s, producing weak returns. The U.S. economy suffered from “stagflation” (high inflation + low growth).
Globalization Disruptions and Trade Restrictions
Wars damage trade relations, causing countries to impose economic sanctions and export bans. Companies that rely on global supply chains (tech, auto, energy firms) suffer from higher production costs. Wars that involve major energy producers (Russia, Middle East) disrupt global oil and gas supplies. Example: Russia- Ukraine War (2022—Present): The U.S. and EU imposed sanctions on Russia, cutting off oil and gas exports. European energy prices soared, leading to recessions in Germany and the UK. Multinational companies (McDonald’s, Starbucks, Shell) exited the Russian market, causing revenue losses.
Why War Creates Volatility and Drives Stock Market Fluctuations
Uncertainty drives market fluctuations during wartime. As investors speculate about unpredictable outcomes, stocks experience sharp up-and-down swings.
Uncertainty and Market Speculation
Markets hate uncertainty, and war introduces unpredictable outcomes that make investors nervous. Speculation about military escalation or ceasefires causes sharp up-and-down market swings. Example: Israel-Gaza Conflict (2023): Stock markets fell on the first day of the conflict, then rebounded after Israel reassured investors of economic stability. Defense stocks surged as military contracts were expected to rise.
Currency Market Fluctuations
Wars weaken the currencies of conflict-affected nations. Countries involved in war experience capital outflows, devaluing their currencies. Safe-haven currencies (USD, JPY, CHF) gain value. Example: During the Russia- Ukraine War, the Russian ruble lost 40% of its value in early 2022 but later rebounded as capital controls were introduced.
How GoMoon.ai Helps Traders Track War-Driven Market Reactions in Real Time
GoMoon.ai helps traders pinpoint how geopolitical events impact stock prices. The platform uses artificial intelligence to monitor, assess, and predict market reactions to war-related developments.
AI-Powered Geopolitical Risk Tracking
GoMoon.ai monitors live war-related events and assesses their market impact. The platform provides real-time alerts on economic sanctions, military escalations, and ceasefires.
Historical Market Replay for War-Driven Crises
GoMoon.ai lets traders analyze past wars (WWII, Vietnam, Gulf War, Russia-Ukraine) to understand historical stock market reactions. AI-driven market simulations help traders predict how similar conflicts may impact stock prices today.
AI Event Impact Scores for War-Related Market Risks
GoMoon.ai ranks conflicts on a scale from 1 to 10 based on the severity of their market impact. This helps traders anticipate which sectors and assets will be most affected.
Sector-Specific Insights on Defense, Energy, and Commodities
GoMoon.ai tracks military spending announcements that affect defense stocks. The platform provides oil and gas supply disruption alerts for energy traders and analyzes safe-haven asset performance in wartime environments.
Industries That Benefit or Suffer During Wartime
Sectors That Prosper Amid War-Driven Chaos
Some industries gain value during conflicts, particularly those tied to defense, energy, cybersecurity, and commodities. Governments increase military budgets, supply chain disruptions raise commodity prices, and companies specializing in security services experience higher demand.
Defense and Aerospace Industry
Why It Benefits
Governments increase military spending to fund war efforts.
Defense contractors receive massive contracts for weapons, aircraft, and surveillance technology.
Wars accelerate technological innovation in military-related industries.
Stock Market Impact
Defense and aerospace stocks see significant gains as demand for military equipment increases.
Investors move money into companies with long-term defense contracts.
Top Stocks That Surge During Wars:
Lockheed Martin (LMT) – A Major U.S. defense contractor specializing in fighter jets, missiles, and space defense systems.
Raytheon Technologies (RTX) – Producer of defense systems, surveillance, and cybersecurity solutions.
Northrop Grumman (NOC) – Supplies stealth bombers, drones, and aerospace defense.
General Dynamics (GD) – Builds tanks, submarines, and combat vehicles.
BAE Systems (BA.L) – British defense and aerospace company benefiting from NATO contracts.
Example
During the Russia- Ukraine war (2022), defense stocks surged as NATO increased military aid to Ukraine. Lockheed Martin's (LMT) stock rose over 20% in the months following the conflict’s escalation.
Energy Sector (Oil & Gas Producers, Renewable Energy, Utilities)
Why It Benefits
Wars involving major oil-producing nations disrupt energy supply chains, causing oil and gas prices to rise.
Countries seek energy independence, boosting investments in domestic energy production and renewables.
Stock Market Impact
Oil prices skyrocket, benefiting oil producers and energy companies.
Utilities remain defensive stocks during war-related market volatility.
Top Stocks That Surge During Wars:
ExxonMobil (XOM), Chevron (CVX), and Shell (SHEL) are global oil giants that benefit from rising crude oil prices.
Occidental Petroleum (OXY) – Heavily invested in shale oil production, benefiting from energy shortages.
NextEra Energy (NEE), Enphase Energy (ENPH) – Renewable companies gaining from energy transition efforts.
Example
During the Yom Kippur War (1973), an oil embargo by OPEC quadrupled oil prices, sending energy stocks soaring. In 2022, oil stocks gained over 50% after Russia invaded Ukraine as Western countries imposed sanctions on Russian oil exports.
Cybersecurity Industry
Why It Benefits
Modern wars involve cyberattacks on critical infrastructure, banking systems, and government institutions.
Countries are increasing their spending on cyber defense to prevent digital warfare and hacking threats.
Stock Market Impact
Cybersecurity stocks rise as demand for cyber protection solutions increases.
Top Stocks That Surge During Wars
Palo Alto Networks (PANW) – Specializes in firewall and cloud security solutions.
CrowdStrike (CRWD) – Leader in AI-driven cybersecurity software.
Fortinet (FTNT) – Provides network security infrastructure for businesses and governments.
Example
In 2022, cybersecurity stocks rose following reports of Russian cyberattacks against Ukraine and U.S. infrastructure.
Commodities (Gold, Silver, Agricultural Goods, Industrial Metals)
Why It Benefits
Wars disrupt the supply chain, increasing demand for physical assets like gold, silver, and industrial metals.
Agricultural disruptions raise food prices, benefiting farming and commodity trading firms.
Stock Market Impact
Gold and silver prices rise as investors seek protection from inflation and economic instability.
Agricultural and industrial metals gain value as supply shortages impact global trade.
Top Commodities That Surge During Wars:
Gold (GLD ETF, Barrick Gold – GOLD.
Newmont Mining – NEM – Traditional safe-haven asset during war.
Wheat (WEAT ETF) – Gains value when agricultural supply chains are affected.
Copper (CPER ETF, Freeport-McMoRan – FCX) – Used in construction and military technology.
Example
Gold surged to over $2,000 per ounce in 2022 as inflation and geopolitical uncertainty increased due to the Russia- Ukraine war.
Sectors That Suffer During War
Specific industries experience declining revenues, falling stock prices, and economic instability during wartime. These industries are sensitive to consumer sentiment, discretionary spending, and supply chain disruptions.
Airlines & Travel Industry
Why It Suffers
Wars create flight restrictions, fuel price hikes, and reduced tourism. Fear of terrorism and conflict zones lowers the demand for international travel.
Stock Market Impact
Airline and hotel stocks decline as travel demand weakens.
Example
After 9/11, airline stocks (American Airlines, United Airlines) fell over 50% in months due to travel fears.
Consumer Discretionary & Luxury Goods
Why It Suffers
During wars, consumers reduce spending on luxury products, electronics, and entertainment. High inflation and rising unemployment reduce disposable income.
Stock Market Impact
Retail, automobile, and luxury brand stocks decline.
Example
The Vietnam War (1955-1975) contributed to economic stagnation, hurting retail and auto sales.
Global Manufacturing & Supply Chain-Dependent Companies
Why It Suffers
Wars disrupt global supply chains, delaying shipments and raising production costs. Countries impose sanctions and trade restrictions, reducing multinational corporations' market access.
Stock Market Impact
Tech, auto, and industrial manufacturing firms suffer from disrupted supply chains.
Example
Apple (AAPL) faced supply chain issues in 2022 due to U.S.- China trade tensions and the war in Ukraine.
How GoMoon.ai Helps Traders Track Industry Performance During War
GoMoon.ai provides real-time tracking, analysis, and AI-driven insights to help traders
Monitor War-Driven Market Shifts
AI-powered event tracking alerts traders to sector rotations caused by conflicts.
Analyze Past Wars and Market Trends
Historical data on how stocks reacted to previous wars (WWII, Gulf War, Russia-Ukraine).
Predict Market Reactions to Geopolitical Risks
AI-generated impact scores help traders anticipate which sectors will benefit or decline. GoMoon transforms economic calendar data with AI-powered insights for smarter trading decisions. Our platform analyzes global events and rates their market impact on a scale of 1-10, helping you understand how they'll affect various assets. We've included everything traders need: live economic event streaming, custom notifications, and historical event replay with TradingView charts. What sets us apart is our comprehensive approach to event analysis.
Whether you're tracking the impact of major economic announcements or comparing forecast data with actual outcomes, GoMoon provides straightforward, actionable insights. You can personalize your calendar, stream live meetings directly on the platform, and analyze historical events like the dot-com bubble or COVID-19 crash to understand market reactions better. GoMoon clarifies the complex world of economic events for traders seeking data-driven decisions. Get started for free to get AI-powered economic insights today.
Trading Strategies to Profit from War-Driven Market Volatility
Find Profitable Investment Opportunities in a War Economy
Wars create unique economic conditions that can devastate some sectors while boosting others. Savvy traders can capitalize on these trends for short-term profits. By tracking changes in market sentiment and reactive sector performance, they can identify high-performing industries and rotate out of lagging sectors.
How Option Strategies Can Protect Against Market Crashes
Options trading, especially put options, can help traders hedge against significant market declines. As uncertainty rises, so do options premiums, allowing investors to profit through strategic buying and selling.
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Use Our AI-powered Economic Calendar Tool for Free Today
War disrupts the flow of trade and commerce. Markets don’t like uncertainty, and conflicts like wars create much of it. When it’s unclear how a situation will develop, how long it will last, and what the outcome will be, investors can panic, and stocks can plunge. For instance, when Russia invaded Ukraine in February 2022, the S&P 500 immediately dropped about 10% as investors reacted to the uncertainty. Economic data is a key indicator of how conflicts will affect the markets. So, it’s no surprise that GoMoon, with its AI-powered analysis of financial events, can help traders make more intelligent decisions when war breaks out.
The Short-Term Impact of War on Stock Prices
Typically, the stock market reacts negatively to wars and conflicts in the short term. As mentioned, uncertainty is the root cause of this trend. As a result, the economic outlook deteriorates, and companies may even issue warnings about future performance. These developments can lead to a panic sell-off that drags down stock prices. Additionally, specific sectors can react differently to the news of an impending war or conflict. For instance, defense contractors and energy companies may see stock price increases, while travel-related businesses may suffer.
The Long-Term Effects of War on Stocks
The long-term effects of war on the stock market can be positive. Once the economy gets a better handle, stocks can stabilize and recover. In some cases, specific sectors can benefit from the new standard created by the conflict. For example, after the initial shock of Russia’s invasion of Ukraine, energy stocks began to rally as investors adjusted to the likelihood of continued supply chain disruptions and high inflation. GoMoon is a fresh alternative to traditional economic calendars. While typical calendars simply display upcoming economic events, GoMoon uses AI to analyze them and their potential impact on the financial markets. The platform then provides users with actionable insights that help them make better trading decisions.
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