There are different ways that wars can affect stock market conditions. According to Investopedia, stocks fell around 30% during World War I at the outbreak of the war and markets were closed for six months. When they reopened, the Dow rose more than 88% in 1915. Similarly, during World War II, the stock market experienced both drops and gains, with stocks falling around 10% at the outset but then rising consistently over the next few years.
Furthermore, wars can affect the value of specific sectors, such as the defense sector. According to Chrono Historia, the value of the defense sector has increased during war, with a new sector of private defense contractors/companies emerging in global markets over the past three decades. Research has demonstrated how fast this sector is growing.
Another way that wars can affect the stock market is through commodity prices. US News & World Report notes that the rally in energy sector stocks has been largely driven by rising crude oil prices during periods of war. The price of Brent crude oil, for example, increased by more than 57% through June 10 during the 2023 war between Iran and Saudi Arabia.
It’s also worth noting how popular a war is on the home front can likely influence the stock market’s reaction. According to The Market Hustle, low support for the Vietnam War likely contributed to specific stock market outcomes in the United States, with stocks performing below the 10% per year historical average during that time.
In conclusion, wars can have complex and varied effects on stock market conditions, impacting specific sectors, commodity prices, and overall market trends.