You might astonish how war can affect the stock market, but we can explain with recent events. Well, they both are entirely two different things, but war is one the crucial issue when it comes to making money in the economy. The stock market reacts differently to different variables, but war can entirely make it shut down. For instance, in the time of World War 1, the stock market closed for four months throughout the world after the war started.
No matter which part of the world whether it is US-Korea, US-Iraq, India-Pakistan, or any other country have conflicts or have a war-like situation, it does affect the stock market negatively. In the time of the war, people start selling their bonds and shares and make fewer investments as there is a state of instability, and they start investing in companies like weapons and gun powder, etc.
To determine the influence of the war, let’s look into how the wars that have happened recently and have shaken up the stock market. Many people have the impression that the recession of the 2000s started with terror attacks on 11 September 2001, because after that incident the events have dropped down sharply.
North Korea Testing Missiles
Geopolitical tensions occur due to North Korea, which may trigger a war-like situation that eventually impacts other stock markets across the globe. According to the report, if North Korea tests its ballistic missile, then there will be a sharp decline in its stock market.
India-Pakistan Air Conflict
There is no doubt that the stock market has affected by war jitters. In the time of peace, we both neighbors have a strong rally, but the market immediately moves to worse because of Indo-Pak Air Strike, and there had been a decline of 200 points in Sensex and 10800 falls in Nifty. While on the other side, Karachi gets the shock of a 4% loss in its stock Exchange tank. Even after the Kargil war, there was a decline in the stock market of both countries.
Well, wars are of different categories and make sure which one you want to highlight. A war in some cases can be beneficial for the economy take, for instance, the US markets, when the United States decided to go back to Iraq in 2003 we’d currently been in a 2-year bear market, and once the invasion of Iraq started, the markets began to bullish again. And we went on to have a 4-year bull market, the World War, which is a whole different ball game, and it was generally bad for economies particularly for those involved in the actual war. For instance, look at Germany, it was only between 1933 and mid-1939 that the country prospered, but once the war declared in early fall of 1939, their economic prosperity was no more. Now on the other hand, once a war is over this generally generates a new bull market as hope comes back to investors.