Scenario guides / War & geopolitical conflict
⚔️ War & geopolitical conflict
Armed conflict is the oldest market shock there is, and the pattern it produces is remarkably consistent: capital flees toward hard assets, essential supplies and government-backed demand, and away from anything that depends on open borders and confident consumers.
What history shows
The 1973 Yom Kippur War triggered the Arab oil embargo: crude roughly quadrupled in months, Western equities entered a brutal bear market, and gold began a seven-year climb. The lesson — regional wars become global economic events when they touch commodity supply lines — has repeated ever since.
The 2022 invasion of Ukraine was a textbook case at modern speed. European natural gas prices rose to roughly ten times their pre-crisis norms at the peak; wheat futures spiked because Russia and Ukraine together supplied about a quarter of world wheat exports; gold jumped; European defence contractors re-rated almost overnight as governments announced rearmament programmes; and airlines were squeezed by closed airspace and fuel costs.
The Gulf War (1990–91) added a nuance: markets fell on the invasion of Kuwait, but bottomed and rallied hard once the outcome became clear. Conflict-driven selloffs are often sharp but shorter than the wars themselves — markets price uncertainty, not casualty counts.
Assets that have tended to gain
- Defence & aerospace stocks — rearmament budgets are multi-year government commitments, the most reliable order book in equities.
- Gold — the classic wartime store of value: no issuer, no counterparty, no borders.
- Oil, gas and energy producers — when supply routes or exporters are in the conflict zone.
- Agricultural commodities — grain, fertiliser and food prices rise when exporting regions are disrupted.
- Cybersecurity — modern conflict includes a cyber front, and both governments and companies raise spending.
- Safe-haven currencies — the US dollar and Swiss franc historically strengthen as capital seeks depth and neutrality.
Assets that have tended to suffer
- Airlines, travel & tourism — closed airspace, fuel spikes and fear are a triple blow.
- Consumer discretionary & luxury — uncertainty postpones big-ticket spending.
- Equities and property near the conflict — local markets bear the direct destruction and capital flight.
- Growth stocks generally — risk appetite shrinks and higher inflation pressures valuations.
Wildcards and caveats
Wars are also inflationary — governments borrow and spend heavily — so prolonged conflict often blends into an inflation scenario. And timing is treacherous: markets frequently recover while fighting continues, once the worst-case outcome is off the table. History rewards positioning for resilience, not panic.