As if inflation, stubborn interest rates, and a lackluster real estate market weren’t enough to create uncertainty in the stock market, now we have a new war!
The markets have been zipping along pretty nicely so far this year, and kaboom—the unexpected war has created challenges for investors.
The good news is that, historically, while warfare does create short-term market selloffs, it doesn’t usually cause long-term disruptions to the stock market.
The following two graphs demonstrate the short-term effects (and subsequent bounces) in the markets following the Russia-Ukraine conflict beginning in 2022 and the Israeli-Hamas war that started in the fall of 2023.
Russia-Ukraine War
Source: Investopedia
Israeli-Hamas War
Source: Investopedia
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My research led me to the following table that shows major armed conflicts dating back to World War II. The result: The average market drop after these events was 4.6%, usually followed by a market resurgence about six weeks later.
| Event | Date | Total Drawdown | 1 Year Later |
| Pearl Harbor Attack | Dec. 7, 1941 | -19.8% | 11.4% |
| Hungarian Uprising | Oct. 23, 1956 | -0.8% | -8.2% |
| Suez Crisis | Oct. 29, 1956 | -1.5% | -8.8% |
| Cuban Missile Crisis | Oct. 16, 1962 | -6.6% | 32.1% |
| Kennedy Assassination | Nov. 22, 1963 | -2.8% | 27.8% |
| Munich Olympics | Sep. 5, 1972 | -4.3% | -3.1% |
| Yom Kippur War | Oct. 6, 1973 | -0.6% | -41.1% |
| Iraq’s Invasion of Kuwait | Aug. 2, 1990 | -16.9% | 14.0% |
| U.S. Terrorist Attacks | Sep. 11, 2001 | -11.6% | -11.2% |
| Bombing of Syria | Apr. 7, 2017 | -1.2% | 12.7% |
| Iranian General Killed In Airstrike | Jan. 3, 2020 | -0.7% | 18.2% |
| Russian Invasion of Ukraine | Feb. 17, 2022 | -6.8% | -5.3% |
| Israel-Hamas War | Oct. 9, 2023 | -4.5% | 35.5% |
| Israel Airstrikes on Iran Nuclear Sites | Jun. 12, 2025 | Ongoing | Ongoing |
| U.S.-Iran Strikes | Feb. 28, 2026 | Ongoing | Ongoing |
Table: Investopedia/Peter GrattonSource: LPL Financial
At this point, we have no idea how long this latest war will go on. The President says it could be 4-6 weeks, but as with most conflicts, you can probably count on it lasting longer.
In the meantime, as with most wars, energy and defense stocks are usually the first beneficiaries of the chaos, although the appreciation isn’t always long-term. Right now, with the Strait of Hormuz closed, you can bet that oil prices will continue to rise. And if the conflict continues for a while, you’ll see defense contractors benefit from the rising demand.
But don’t forget, the temporary market decline will hit many sectors, and stocks that have no fundamental reason for dropping will fall due to the overall market suffering in the short term.
So, with that in mind, I can see some areas becoming ripe for bargain-hunting.
The following chart shows you the best and worst sectors so far in 2026.
| Name | YTD | 1-Year | 3-Year |
| Energy | 26.41% | 28.72% | 29.54% |
| Basic Materials | 14.53% | 19.43% | 22.79% |
| Industrial | 13.10% | 30.55% | 69.23% |
| Consumer Staples | 12.95% | 5.05% | 20.95% |
| Utilities | 10.26% | 18.67% | 42.10% |
| Real Estate | 8.30% | 0.41% | 12.77% |
| Healthcare | 1.25% | 4.79% | 21.34% |
| Communication Services | 0.20% | 16.82% | 115.41% |
| Consumer Discretionary | -4.23% | 7.90% | 56.33% |
| Technology | -4.49% | 25.76% | 96.23% |
| Financial Services | -6.50% | -1.02% | 42.29% |
Source: Seeking Alpha
As you can see, energy stocks are currently the darlings. And while I think there are probably many energy/oil stocks that are attractive right now, I also believe it pays to be very picky in such a volatile market.
For me, I would concentrate on some of the out-of-favor sectors such as Technology and Financial Services. And, it also never hurts to add some dividend-paying investments during a time of market uncertainty.
Here are a few ideas for some exchange-traded funds that look attractive to me right now.
3 ETFs That Look Attractive Now
iShares Global Financials ETF (IXG)
Invesco Dynamic Semiconductors ETF (PSI)
Vanguard Dividend Appreciation ETF (VIG)
Remember…this, too, shall pass.
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