Quick Bites | The Historical Impact of War on Equity Market Performance

The recent conflict that has broken out between Israel and Hamas is devasting, and whilst still early days, it will unfortunately come at a high cost.

How do wars affect equity market performance?

Wars have historically hurt equity markets due to increased uncertainty and instability. However, the severity varies depending on factors like the nature of the conflict and its impact on major economies.

Looking at historical examples, during World War I and World War II, the S&P 500 saw negative performance. Noting that not all wars follow this pattern.

Source: Ndovu Academy


In 2003, leading up to the Iraq War, there was heightened volatility, and markets declined. However, surprisingly, following the start of the war, the S&P 500 and ASX 200 indices both recovered significantly, gaining more than 35% and 26%, respectively by year-end from their March 2003 lows.

Source: FactSet, Clime Investment Management


Similarly, in 2022, Russia’s invasion of Ukraine initially caused a dip in global markets, but they bounced back within a month.

Source: FactSet, Clime Investment Management


What does this mean for investors?

While the conflict between Israel and Hamas develops, we highlight that wars tend to create short-term elevated volatility and negative market performance. History shows that markets often recover relatively quickly and without any sustained impact on long-term performance.



Disclaimer: Clime Asset Management Pty Limited | AFSL 221146 | ABN 72 098 420 770.  The information provided in this post is intended for general use only. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information contained therein. Please consider the relevant disclosure document/s before investing in one of our products. Investment in securities and other financial products involves risk. An investment in a financial product may have the potential for capital growth and income but may also carry the risk that the total return on the investment may be less than the amount contributed directly by the investor. Investors risk losing some or all of their capital invested. Past performance of financial products is not a reliable indicator of future performance or returns.