Wall Street in Wartime: How U.S. Markets Performed During Every Major American Conflict

There's a counterintuitive truth buried inside 110 years of market data: stocks have, more often than not, risen during wars. Not in some callous, abstract sense - but in the purely mathematical, bottom-line sense that Wall Street has delivered positive price returns over the full span of every completed major American conflict in this study. The stock market rallied during World War I. It rallied during World War II. It rallied during Korea, Vietnam, the Gulf War, the 20-year war in Afghanistan and the Iraq War.

The closest thing to an exception was the opening stretch of the War on Terror: from the last close before 9/11 (1,092.54 on September 10, 2001) to September 10, 2003 (1,010.92), the S&P 500 was down about 7.5%. Even then the context matters enormously: the dot-com bust had already knocked the market off a cliff before a single bomb was dropped in Afghanistan, and over the full 20-year war the index more than quadrupled.

That's the big picture. But the story gets far more interesting when you get into the specifics: how the market reacted in the hours and days after the opening shots were fired, which conflicts triggered genuine market panics and which barely moved the needle, and what happened in that crucial first year after the fighting stopped.

Dave's Note
The two world wars are measured with Dow Jones Industrial Average (DJIA) daily closes from the MeasuringWorth series (which splices the pre-1914 12-stock average onto the 20-stock average the NYSE reopened with in December 1914), because the S&P 500 in its modern form only launched in 1957. Every conflict from the Korean War (1950) on is measured with S&P 500 daily closes. Each war runs from the last close before the fighting began to the last close on or before its end date, and "1 Year After" is the following 12 months. All figures represent price returns only - dividends would make these numbers meaningfully higher - and none are adjusted for inflation. The windows differ in length and some overlap (Afghanistan contains the whole Iraq War), and I have not compared them with peacetime periods of the same length. U.S. stocks have risen over most multi-year stretches with or without a war, so these results show what happened during each conflict, not that war caused the gains. Before March 1957 the S&P 500 figures used for Korea are the S&P 90-stock Composite that preceded the 500-stock index.

01The Complete Scoreboard - All 8 Conflicts

Here's the full data at a glance - every major U.S. conflict, its duration, the market's price return over the war period, and what the market did in the 12 months after it ended.

DJIA price returns for World War I run from July 27, 1914 (57.92, the last close before Austria-Hungary declared war) to November 9, 1918 (88.06, the last close before the Armistice), and for World War II from August 31, 1939 (134.41) to August 31, 1945 (174.29, the last close before Japan's formal surrender on September 2). S&P 500 price returns for Korea run from June 23, 1950 to July 27, 1953 (19.14 to 24.07) and for Vietnam from March 5, 1965 (the last close before Marines landed at Da Nang on March 8) to March 29, 1973 (86.80 to 112.71). S&P 500 price returns for the Gulf War, Afghanistan and Iraq run from the last close before the fighting began to the close nearest its end (Aug 1, 1990 to Feb 28, 1991; Oct 5, 2001 to Aug 30, 2021; Mar 19, 2003 to Dec 16, 2011); "1 Year After" is the following 12 months. *Iran War figure runs from the February 27, 2026 close (the last session before the February 28 strikes) to the October 30, 2026 close; the war had not ended as of that date.

The 2026 Iran War, to date. US and Israeli strikes on Iran began on February 28, 2026. The S&P 500 closed at 6,878.88 the day before and fell to 6,343.72 by March 30, 2026 - a 7.8% decline - as Brent crude spiked toward $119 a barrel. The index was back to its pre-war level by mid-April and closed at 7,580.07 on October 30, 2026, up 10.2% since the war began. Over the same stretch the Dow gained 5.7% (from 48,977.92 to 51,770.31) and the Nasdaq gained 12.2% (from 22,668.21 to 25,437.00). A June 17, 2026 memorandum to end the war collapsed when fighting resumed on July 7, and as of October 30, 2026 there was no ceasefire in place. Because the conflict is unfinished, it is not counted in the "7 of 7" tally on this page.

Market Price Return During Each Conflict (%)

02War by War - The Full Story

The aggregate numbers tell one story. The individual conflict narratives tell a far richer one. Each war had a completely different market fingerprint - shaped by the element of surprise, by the underlying state of the economy, and by whether the conflict expanded or contracted U.S. industrial production.

World War I

1914 - 1918

When war broke out in Europe in July 1914, U.S. markets panicked over fears that European nations would liquidate their American holdings. The Dow fell nearly 10% in the three sessions after Austria-Hungary declared war (from 57.92 on July 27 to 52.32 on July 30), and the NYSE closed on July 31, 1914 - and didn't reopen for over four months. When it did, on December 12, 1914, the Dow closed at 54.62, 5.7% below its July 27 close and about 11% below its March 1914 high on the MeasuringWorth series, and it bottomed at 53.17 on December 24. But the bounce that followed was one for the history books: the Dow surged 81.7% in 1915 alone (54.58 to 99.15) - the highest single-year return the DJIA has ever recorded. War contracts flooded U.S. manufacturers. Steel, munitions and food exports to the Allies turned America from debtor nation to creditor nation almost overnight. The Dow was back above its pre-war level by January 18, 1915 and peaked at 110.15 on November 21, 1916, then slid 40% to 65.95 by December 19, 1917, eight months after the U.S. entered the war. By the last close before the Armistice (88.06 on November 9, 1918), the Dow was up 52% from where it stood at the war's start.

World War II

1939 - 1945

Here's the headline that surprises most people: when Hitler invaded Poland on September 1, 1939, the Dow went up. On September 5, the first full session after Britain and France declared war, it jumped 7.3% in a single day, leaving it 10.2% above its August 31 close (134.41 to 148.12). Wall Street apparently liked that European demand for American goods would surge. Pearl Harbor was a different story - stocks dropped 3.5% on December 8 and continued falling, hitting a maximum drawdown of around 20% by April 1942. But then something remarkable happened: from that April 28, 1942 low (92.92) to August 31, 1945, the last close before Japan's formal surrender, the Dow climbed 88%. Annualized returns from Pearl Harbor through December 1945 were a stellar 13.2% per year. Measured over the whole war, from the last close before the invasion of Poland to the last close before the surrender, the Dow gained 29.7%, or 4.4% a year.

Korean War

June 1950 - July 1953

The Korean War produced one of the fastest recoveries of any major conflict. The S&P 500 fell 5.4% on June 26, 1950, the first session after North Korea invaded the South, and 12.9% in all by its July 17 low - and then recovered those losses entirely within two months, closing back above its June 23 level on September 14, 1950. From there, the market barely looked back. The S&P 500 gained about 26% over the full three-year conflict (19.14 on June 23, 1950 to 24.07 on July 27, 1953) - solid when you consider the index finished calendar 1950 up 21.7% and added another 16.4% in 1951. The American economy was running hot off the back of post-WWII prosperity, the GI Bill was fueling consumer demand, and defense spending was ramping up again. Investors who panicked and sold during that initial 13% drop missed one of the steadiest bull runs of the early Cold War era.

Vietnam War

Mar 1965 - Mar 1973

Vietnam is the most complicated conflict to analyze cleanly, because the war overlapped with so many other economic upheavals: the 1968 assassinations of Martin Luther King Jr. and Robert F. Kennedy, the 1969-70 recession, Nixon's shock, and the early stages of the oil crisis. The numbers still came in positive - the S&P 500 returned +30% over the eight years of active U.S. involvement (86.80 on March 5, 1965 to 112.71 on March 29, 1973), about 3.3% annualized, despite a 36% drop from its November 1968 peak to its May 1970 low. But the backdrop was increasingly turbulent. The real pain came after U.S. troops withdrew in 1973, when the Arab oil embargo triggered a vicious bear market that cut the S&P 500 nearly in half by late 1974.

Gulf War

Aug 1990 - Feb 1991

The Gulf War produced the sharpest wartime sell-off of the modern era, even though the S&P 500 finished the full conflict up about 3% - and context is everything. When Iraq invaded Kuwait on August 2, 1990, oil prices spiked, recession fears mounted, and the Dow dropped roughly 21% by October - its sharpest wartime decline since WW2. The conflict was also brief and decisive: Operation Desert Storm launched in January 1991, and a ceasefire was declared 100 hours after the ground campaign began. The market's response to the swift victory was explosive. The S&P 500 gained about 12% in the year following the war's end and finished calendar 1991 up 26.3% (330.22 to 417.09).

Iraq War

Mar 2003 - Dec 2011

The Iraq War offered a masterclass in "buy the uncertainty, sell once the news is certain." Markets had been falling for months in the lead-up to the invasion as speculation mounted. When the actual invasion launched on March 19, 2003, the Dow rose 2.3% the next day. The S&P 500 gained an extraordinary 27.0% in the first 12 months of the conflict. From the pre-invasion low all the way to year-end 2003, the Dow was up 30%+. It's worth noting this came off the brutal 2000-2002 bear market - there was enormous pent-up buying pressure - but the war itself provided the "certainty" the market was looking for.

03The First 24 Hours - Shock Data

How did markets react in the immediate aftermath of the opening shots? The data reveals a consistent pattern: surprise attacks trigger the sharpest drops; anticipated conflicts often see the market rise when hostilities begin because uncertainty resolves into certainty.

04The Year After - What Happened When the Guns Went Quiet

In some ways, the most interesting data point isn't what happened during the war - it's what happened in the 12 months immediately following. The post-war period varied dramatically depending on the economic conditions waiting on the other side of the ceasefire.

S&P 500 / Dow Performance - First 12 Months After War Ended

05Which Sectors Win During War?

The broad market numbers tell part of the story. But sector-level returns reveal the real winners and losers. Defense and energy consistently outperform during active conflicts; consumer discretionary and airlines often suffer. Here's a composite picture of wartime sector performance across multiple conflicts:

Defense & Aerospace	+45% avg
Energy & Oil	+28% avg
Materials & Mining	+21% avg
Industrials	+14% avg
Broad Market (S&P/DJIA)	+10% avg
Consumer Discretionary	-5% avg
Airlines	-18% avg (Gulf/9-11)

Composite averages across WW2, Korean War, Vietnam, Gulf War and Iraq War. Defense figures skew heavily toward WWII manufacturing contracts.

06The War Volatility Paradox

Here's something that confounds most casual observers: stock market volatility is actually lower during wartime than during peacetime. This isn't intuition - it's a well-documented finding backed by serious academic research, including a 2022 NBER working paper from economists at multiple universities who analyzed all U.S. conflicts from 1926 onwards.

The mechanism makes sense once you think about it. During a war, especially a major conflict, the government essentially pre-commits to massive spending. Factories have contracts. Defense companies have backlogs. Revenue becomes far more predictable. The uncertainty that normally drives volatility - "what will demand look like next quarter?" - largely evaporates for a significant chunk of the industrial economy.

Stock Market Volatility: Peacetime vs. Wartime (Historical Average)

07Five Things the Data Actually Tells Us

After wading through a century of wartime market data, a few consistent themes emerge. These aren't predictions - past performance, as every fund prospectus will remind you, doesn't guarantee future results. But the patterns are real and worth understanding.

1. Surprise Attacks Hit Hardest

The conflicts that triggered the largest immediate market drops were the ones nobody saw coming. Pearl Harbor. The North Korean invasion of the South. 9/11. In each case, the market had no time to price in the risk beforehand. Anticipated conflicts are a different story entirely - when the U.S. invaded Iraq in 2003, months of lead-up speculation had already done the damage, and the actual invasion day saw the Dow close higher.

2. Wars Are Economic Stimulus in Disguise

The unpleasant truth is that large-scale warfare is one of the most effective economic stimulus programs ever devised. Government spending surges. Industrial output expands. Unemployment falls. During WWII, the U.S. unemployment rate dropped from 14.6% in 1940 to 1.2% by 1944. The Defense Plant Corporation poured nearly $4 billion (equivalent to $69 billion today) directly into DJIA-listed companies. When you understand this, the wartime market returns stop being counterintuitive.

3. The Year After Depends Entirely on What's Waiting

There's no such thing as a reliable "post-war bounce." After WW1, the Dow gained 31% in 12 months, and after Korea the S&P 500 gained 27%. After Vietnam, the S&P 500 fell nearly 17% (though the oil embargo deserves most of that blame). After WW2, the Dow managed a modest 8.5% before a sharp sell-off in late 1946, and the sustained bull market did not take hold until the 1950s. The state of the peacetime economy - inflation, oil prices, consumer confidence - matters far more than the simple fact of the war ending.

4. Oil-Linked Conflicts Are Different Animals

The two conflicts that produced the worst immediate market outcomes - the Gulf War and the post-Vietnam period - both involved major disruptions to global oil supply. The Yom Kippur War in 1973 combined with the Arab oil embargo sent the S&P 500 down 16%. The Gulf War oil spike triggered a 21% drawdown in the Dow (about 20% in the S&P 500). When military action threatens oil supply chains, the market reacts far more violently than it does to conflicts in non-energy regions.

5. Selling Into War Panic Has Been Consistently Costly

Perhaps the most actionable takeaway from this entire dataset: in six of the eight major conflicts studied, an investor who sold at the moment of maximum drawdown and stayed in cash would have missed massive subsequent gains. The three-and-a-half-week panic following Korea's outbreak resolved into a steady 26% total gain - and a further 27% gain in the year immediately after the war ended. The investor who sold at the post-Pearl Harbor low in April 1942 missed an 88% run to Japan's surrender.

08Key Sources

• Samuel H. Williamson, "Daily Closing Values of the Dow Jones Average in the United States, 1885 to Present," MeasuringWorth (DJIA closes for World War I and World War II)
• S&P 500 daily closes, 1950-2026 (S&P Dow Jones Indices)
• iSectors LLC - "Stock Markets in Times of Uncertainty"
• A Wealth of Common Sense - "The Relationship Between War & the Stock Market"
• NBER Working Paper #29837 - "Stock Volatility and the War Puzzle" (2022)
• First Trust Portfolios - "Wars, Geopolitical Shocks & the Stock Market" (2024)
• Invesco - "Markets in War Time" (2022)
• The Motley Fool - "Wartime and Wall Street: How War Affects the Stock Market"
• Defense Manpower Data Center (DMDC)
• Watson Institute, Brown University - Costs of War Project