War is the definition of destruction; it is the conscious decision to kill and slaughter to achieve a strategic objective. Additionally, it is the definition of instability. In contrast, financial markets thrive on stability and certainty; to succeed, they need a sense of financial stability and even geopolitical stability from the world.

However, in the past, it has been observed that financial markets, for the most part, are unaffected in the long run by war, and even in the short run may post small losses but usually bounce back bigger and stronger than before. For example, after the US and Israel launched joint attacks against Iran, and Iran closed the Strait of Hormuz, oil prices shot up by ~45%; meanwhile, the S&P 500 has posted losses of only around 3%. Seen countless times throughout history, the US stock market lacks morality; it only responds to corporate profit and financial conditions.

Put simply, the stock market lacks any type of moral compass; it is not moral nor is it immoral, it is purely driven by the expected earnings of the top 500 companies (S&P 500) in the United States. Despite the incredible geopolitical instability in the world right now, analysts still expect ~15% earnings growth for companies in 2026. The core idea is that as long as earnings grow, so will the stock market, despite the morality or immorality conflicts around the world.

Taking a look back in time, it is seen empirically that markets fall ~2.8% after the announcements of wars and ~7% after they begin; however, they don't take long before they recover and bounce back stronger than before the war. A major reason for this is that war triggers great amounts of government spending, which triggers high corporate profits for companies that receive government contracts. In the first two to three weeks of the war, the government has spent somewhere close to 20 billion and is currently seeking a stimulus of 200 billion to conduct the war.

In all wars, the winners' oil, defense, and commodities benefit directly from this instability. Additionally, investors are forward-looking; they weigh the future recovery against the present chaos to make investment decisions. Furthermore, wars cause capital to rotate, tourism falls while oil rises; they are mere short-term shocks in a game based solely on long-term gains. Additionally, for investors in the US, these effects are even more muted than in countries closer to the conflict; for example, the Japanese Nikkei index fell by ~9%.

Markets are not places to turn to for moral advice and guidance; they are systems of capital allocation. But is that good? It feels that in times like these, the investors and consumers should have an unbiased place to turn to. Even when we feel something is wrong, the market doesn't respond, which may contribute to the cycle of violence that we see throughout the world. If we are financially compensated for war, then where does this cycle stop?

Works Cited
Berkowitz, Bram. “How Will the Conflict in Iran Impact the Stock Market? Here’s What History Tells Us.” The Motley Fool, 10 Mar. 2026, www.fool.com/investing/2026/03/10/how-will-the-conflict-in-iran-impact-the-stock-mar/?utm_source=chatgpt.com. Accessed 18 Mar. 2026.
Culp, Stephen, and Johann M Cherian. “Wall St Ends Sharply Lower as Iran War Intensifies, Crude Price Soars.” Reuters, 12 Mar. 2026, www.reuters.com/business/wall-street-futures-drop-middle-east-tensions-lift-oil-above-100-2026-03-12/.
Faller, Madison, and Erik Wytenus. “The U.S. And Israel Strike Iran: What It Could Mean for Markets.” Jpmorgan.com, 2 Mar. 2026, privatebank.jpmorgan.com/apac/en/insights/markets-and-investing/tmt/the-us-and-israel-strike-iran-what-it-could-mean-for-markets?utm_source=chatgpt.com. Accessed 18 Mar. 2026.
Kollewe, Julia. “Oil and Gas Prices Rise Again after Iran Attacks Production Facilities.” The Guardian, 17 Mar. 2026, www.theguardian.com/business/2026/mar/17/oil-gas-prices-rise-iran-us-israel-war-brent-crude-uae-strikes?utm_source=chatgpt.com. Accessed 18 Mar. 2026.
Press, The Associated. “How Major US Stock Indexes Fared Tuesday 3/17/2026.” AP News, 17 Mar. 2026, apnews.com/article/wall-street-stocks-dow-nasdaq-a4a5166c24a3567f5a85e5fc97ab11cd. Accessed 18 Mar. 2026.