When the Afghanistan War started in 2001, the S&P 500 dropped 10%, but in the three months following the start of the war, the the index rebounded more than 10% and defense stocks rallied 58% over the course of the conflict.
Keep in mind, too, that this war coincided with the 9/11 terrorist attacks, so there were other factors to consider as well.
Stocks dropped to a low in June 2002, and then rallied about 100% through June 2007 (when the financial crisis began).
If we remove the emotion, politics and all other noninvestment-related aspects of war, and focus solely on the timing of investments, wars offer a relatively rare opportunity to buy stocks.
Looking at the past several wars, we see clear signs of this.
For example, in the weeks leading up to the 2003 Iraq War, the S&P 500 dropped 14%. That war started in March 2003. By the end of 2003, the S&P 500 had gained 26%.
When Russia invaded Ukraine in February 2022, stocks dropped about 7.5%. Stocks troughed in June 2022 and then rallied about 100% through the most recent high set at the end of January 2026.
We have seen about a 10% decline for stocks so far, during the current war with Iran. If there were to be a ground assault, stocks will likely trade lower in the near-term.
For long-term investors, however, this is an opportunity to buy shares in high-quality companies at discounted prices.
As with all wars, this one will eventually end, and stocks will eventually rebound to hit new highs.
Additionally, other assets, including cryptocurrencies like Bitcoin, that have been driven down due to economic uncertainty, high oil prices, the threat of inflation, the threat of recession, etc., offer opportunities for long-term investors.
It is easy to let emotions drive decisions, and for many, the risk of losses, and the pain of uncertainty can be overwhelming. (This is a strong argument for working with a professional financial adviser).
If you can overcome that fear, make good decisions and act decisively to take advantage of opportunities like we are witnessing today, over time your portfolio should perform well.
