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With recent geopolitical tensions in the news, the question keeps coming up: “What will this mean for the markets?” While short-term movements are unpredictable, history provides helpful perspective on how markets respond during times of conflict.

When global conflict breaks out, it’s natural to feel uneasy. Headlines can make it seem like the financial world is on the brink of collapse. Yet history shows that markets often handle geopolitical events better than expected. While markets may react quickly at first, they have consistently demonstrated the ability to recover and move forward—a reminder that staying calm and focused is critical.

Markets Typically React First… Then Adapt

Markets often experience short-term volatility when a war or geopolitical conflict begins. Investors process new risks, supply chains adjust, and uncertainty rises.

But markets are forward-looking. Once the initial uncertainty clears, businesses adapt, economies adjust, and investors shift their focus to the long term. Over time, markets have historically continued moving forward.

Markets Historically Resilient

Markets can still end up moving forward during periods of uncertainty for several reasons:

1. Businesses Adapt – Companies adjust supply chains, shift production, manage costs, and continue operating.
2. Innovation Accelerates – Disruption often drives innovation and economic adaptation.
3. Markets Focus on the Long Term – Investors evaluate years ahead, not just tomorrow’s headlines.

A clear example of this resilience is the COVID shock in early 2020. The S&P 500 fell nearly 34% as the world entered unfamiliar territory. Yet companies adapted quickly—accelerating technology adoption, shifting to remote work, optimizing operations, and improving efficiency. These changes allowed businesses to keep operating and supported a rapid market recovery, with the S&P 500 finishing the year up 18.4%.

Another example occurred during tariff-related volatility in early 2025. The S&P 500 initially sold off, then surged 9.5% in a single day after reciprocal tariffs were paused. Investors who exited during the fear missed a significant portion of the recovery, highlighting that some of the market’s strongest days occur during periods of uncertainty. Emotional decisions in volatile times can have long-term consequences.

Historical Examples

While each conflict is unique, a common pattern emerges: an initial reaction followed by adjustment and recovery.

• Pearl Harbor (1941) – S&P 500 declined 19.8%, but one year later posted a positive return.
• U.S. Terrorist Attacks (2001) – S&P 500 fell about 12%, yet recovered to prior levels within about a month.
• Russia’s Invasion of Ukraine (2022) – S&P 500 dropped about 7% in the weeks following the conflict and returned to pre-event levels in under a month.

Looking across major geopolitical conflicts since World War II, the average S&P 500 market decline has been roughly 4–5%, with recovery typically occurring in about 40 days. Each situation is unique, but the pattern is consistent: a short-term shock followed by adaptation and recovery. (Source: For more historical context, see this LPL Research blog).

Past performance does not guarantee future results.

A Quick Perspective

Over the past several decades, investors have lived through:

• Multiple wars and geopolitical conflicts
• Oil crises
• The dot-com bubble
• The Global Financial Crisis
• A global pandemic

Through all of these events, businesses innovated, economies adapted, and markets ultimately moved forward. 

The Takeaway

War is tragic and disruptive, but history consistently shows that markets endure wars, recessions, political crises, and countless other challenges. Despite this, the long-term trend of the market has remained upward. Periods of uncertainty are uncomfortable, but they are a normal part of investing.

The lesson is simple: markets are resilient. Short-term volatility is common and should be expected. Does this mean a large pullback is impossible? No—anything can happen in the short term. Yet history consistently shows that a disciplined, long-term approach remains the most reliable path to meeting investment goals.

When the news cycle feels overwhelming, zoom out and remember that markets have navigated far worse—and continued moving forward. Market volatility is normal. The key is to avoid letting short-term emotions drive long-term investment decisions.

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