Episode summary
Dylan Jovine | How Middle East Wars Impact the Stock Market
Summary
Dylan Jovine argues that Middle East wars have historically been followed by strong stock-market gains, but only after an initial selloff driven by uncertainty. He cites the Gulf War in January 1991, when the market rose 29.1% in the following 12 months, and Operation Iraqi Freedom in March 2003, when it rose 27% over the next year. His point is that the market often weakens in the months before combat as investors wait for clarity, then rebounds once the conflict begins and the situation becomes more legible.
He says the same pattern may be playing out now, especially with the risk of the war widening and oil prices reacting to disruption around the Strait of Hormuz. He also reviews sector behavior across conflicts: energy has been volatile, defense and aerospace have not always spiked immediately, and gold has usually acted as a fast geopolitical hedge. Across the conflicts he discussed, he says aerospace and defense averaged a 9.1% return over the 12 months after war began, while gold often moved sharply in the first days and then remained sensitive to whether the conflict stayed contained.
Key takeaways
- Jovine says the market tends to sell off during the uncertainty before a Middle East war, then rise after combat starts and clarity improves.
- He cites 29.1% and 27% 12-month gains after the Gulf War and Operation Iraqi Freedom, respectively.
- He says energy returns are uneven, with the Gulf War producing a 31% drop and 2003 producing a 23% gain.
- Jovine says aerospace and defense averaged a 9.1% aggregate return over the 12 months after multiple conflicts since 1990.
- He argues gold is a first responder in geopolitical तनाव, jumping in the first 7 to 30 days of a Middle Eastern conflict.
Notable quotes
“the markets tend to rise following the start of the war. But that's a bit misleading because both of those presidents spent the year leading up to major combat operations getting the American public ready”
“So the markets really sold off leading up to major combat operations because of uncertainty. And then the 12 months after that they started to rise again when there was more clarity”
“I think that we're actually experiencing the uncertainty phase right now with the risk of this war widening”
“Over multiple conflicts since 1990, the aerospace and defense industries basically averaged, we'll call it a 9.1% aggregate return in the 12 months following”
“gold is a first responder. It almost always spikes in the first 7 to 30 days of a Middle Eastern conflict”
How the episode opens
Good morning. This is Dylan Jane with Behind the Markets. Happy Tuesday.
Today's Tuesday, March 3rd. Today, I'd like to talk about what happens to the stock market in the 12 months following a war in the Middle East. And we're going to look at the Gulf War and the Iraqi war.
We can also talk about the Libya intervention and ISIS, which are kind of little actions really. But if you look at the Gulf War in January 1991, George HW Bush, Bush 41, the market rose 29.1% in the 12 months following the start of that war. If you look at March 2003, Operation Iraqi Freedom, Bush 43, George W.
Bush, the market rose 27% in the 12 months following the start of that war. So what we see here in the Middle East is that the markets tend to rise following the start of the war. But that's a bit misleading because both of those presidents spent the year leading up to major combat operations getting the American public ready.
They're on TV. They're going to Congress famously remember at the United Nations POW presenting for example the proof of the weapons of mass destruction Iraq. So the markets really sold off leading up to major combat operations because of uncertainty.
And then the 12 months after that they started to rise again when there was more clarity. So what does that tell you? The uncertainty phase the market sold off.
The clarity phase they started to rise. The President Trump didn't really prepare the country for this. So I think that we're actually experiencing the uncertainty phase right now with the risk of this war widening.
So I would be very careful and smart. Again, they should stop saying that we want regime change. They should start saying we want behavior change.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- middle east wars
- stock market reaction
- gulf war analysis
- iraq war aftermath
- sector performance energy defense gold
Watch the episode
Watch “Dylan Jovine | How Middle East Wars Impact the Stock Market” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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