Mar 12, 2026
Don’t Sell the Missiles
We’re almost two weeks into the Iran conflict since they sent missiles across the Persian Gulf on February 28th. “Listen carefully. When you hear the missiles are flying, you buy them, you don’t sell them.” It’s unnerving, but when our emotions are tested, we should see what we can learn from the past.
Let’s get into the actual history of major conflicts to help us respond based on facts, not feelings.
World War I (1914-1918): The stock exchange actually closed for several months in 1914 out of panic!
Short-term: NYSE closed 4.5 months and when it reopened stocks the Dow was essentially flat to slightly down (~0% to -2%)
Peak-to-trough decline: Minimal
Long-term: Dow +100% over the entire period
World War II (1939-1945): The most significant decline of all of the major wars in recent history, but by war-end the market had fully recovered and the baby boom had begun.
Initial response: Dow -3% to -4% the week Germany invaded Poland
Peak-to-trough decline: -50% from 1937–1942
Long-term: Dow +130% from 1942 trough to 1950
Korean War (1950-1953): Markets dipped briefly at the outbreak but recovered within months and continued a broader bull market.
Initial response: Dow -12% in the weeks following the initial invasion
Peak-to-trough decline: -12% and fully recovered within approximately 3 months
Long-term: Dow +117% from war's start to Armistice in 1953
Vietnam War (1964–1973): This is a more complicated analysis as the response to the war, oil embargo, and stagflation were present. They were partly independent and partly connected issues.
Initial response: Dow +15% after the Gulf of Tonkin Incident
Peak-to-trough decline: -45% primarily driven by the oil embargo, stagflation, and wage/price controls
Long-term: Dow +5% over the full war period
Gulf War (1990–91): Sharp drop on Iraq's invasion of Kuwait, then a powerful rally once the air campaign began in January 1991 and a bull market into 2000.
Initial response: Dow -18% from July to October 1990
Peak-to-trough decline: -18% over approximately 3 months
Long-term: Dow +15% over the full war period
Post-9/11 (2001): Markets fell hard the week trading reopened, but recovered to pre-attack levels within about a month. Complicating issues was the attack happening during the middle of the Dot Com Bubble.
Initial response: Dow -7.1% on September 17 (the first day of trading after markets re-opened) and -14.3% for that week
Peak-to-trough decline: -14.3% and fully recovered within 30-40 days
Long-term: Broader bear market of -38% from the 2000–2002 Dot Com Bubble
Russia-Ukraine War (2022): Sharp commodity spike on invasion during a market pullback. Markets recovered quickly, then the Fed began aggressively hiking rates (separate issue) and caused larger damage to the market.
Initial response: -5% to -6% mid-February to mid-March, then mostly recovered by end of March
Peak-to-trough decline: S&P 500 -25%, which includes the Fed rate hiking cycle
Long-term: S&P 500 fully recovered and +24% by end of 2023 from the 2022 trough
No war in modern history has caused a long-term decline in the stock market. In fact, the pattern is remarkably consistent: markets tend to drop sharply on the onset of conflict, then recover and often rally.
The pattern: Wars tend to accelerate industrial output, government spending, and eventually corporate earnings. The long-term damage can show up in inflation and debt, not in equity prices.
The consistent takeaway: Short-term drops of 10–20% are common at conflict onset. In every case the U.S. economy remained intact, markets recovered within weeks to months and were meaningfully higher 2–3 years later. The duration and uncertainty of conflict matters more than the outbreak itself. The more prolonged the conflict, the longer it takes markets to stabilize and resume positive growth.
