How War Reshapes Your Investments: The History and Is This Different?

Over the weekend (first week of March), the United States and Israel launched coordinated strikes on Iran, killing Supreme Leader Ali Khamenei. Iran fired back with missiles and drones across the Gulf. Saudi Arabia's biggest refinery went offline. Qatar halted all LNG exports. And 150 oil tankers dropped anchor in the middle of the Persian Gulf, too scared to move.

On March 2, 2026, the price of oil jumped 13% overnight.

Markets panicked. But history says the first week rarely tells the full story.

Let us break it down.

First, the Strait of Hormuz

Before we talk numbers, you need to understand one narrow strip of water.

The Strait of Hormuz is 33 kilometers wide at its tightest point. It sits between Iran on one side and Oman on the other. And roughly 20% of all the oil consumed (as per MoneyControl) on earth every single day passes through it. Add in LNG (Liquified Natural Gas) tankers, and you have the single most important energy chokepoint on the planet.

Iran did not technically mine the strait or park warships across it. Its Revolutionary Guards announced the strait was closed and threatened to set fire to any vessel that tried to pass.

That was enough.

Marine insurers pulled war risk coverage overnight. Shipping giants including Maersk, MSC, and Hapag-Lloyd suspended all operations in the area. About 150 tankers sat at anchor, going nowhere. Iraq started shutting down oil fields because there was simply no way to ship the crude out. Qatar declared force majeure on LNG deliveries.

What Oil Did

On Friday, February 27, Brent crude was trading at around $73 a barrel.

By Monday morning, it had touched $82.37, a 13% intraday surge, before settling at $77.74 by the end of the day, as per the GlobeandMail. 

By Wednesday, Brent was at $82.76, which was the highest Brent has been in the past 1 year. Year-to-date, Brent is now up more than 34% (as of Friday, 6th March).

JPMorgan said a three- to four week squeeze on Hormuz traffic could push Brent above $100. Bank of America went further, warning that a worst-case prolonged disruption scenario could see Brent above $100 and European gas prices breaking 60 euros per megawatt hour.

Think of it this way. Every time oil gets more expensive, the fuel that powers the trucks delivering your groceries, the planes flying your packages, and the car you fill up on weekends all get more expensive too. In the US, analysts estimate petrol prices could rise by another 10 to 30 cents a gallon in the coming days. In the UK, what was 135p a litre last week could be closer to 150p if oil keeps climbing, as per GBnews.

What Gold Did

Gold had already been having an extraordinary year before any of this started.

In the week before the strikes, gold crossed $5,000 an ounce for the first time ever. It had already gained about 19% this year, following a stunning 64% surge in 2025. Central banks had been buying it aggressively. Inflation fears had been simmering. Geopolitical anxiety had been building.

Then the war began, and gold did exactly what you would expect. It surged. By March 1, it had jumped 5.2% to $5,246 an ounce. By Monday, it was touching $5,417.

Safe haven demand at its most textbook.

But on Tuesday, the Gold spot gold fell 3.6% to $5,137 an ounce, as per the ET.

So what changed?

Here is the twist. Higher oil prices do not just make petrol expensive. They raise the cost of transporting everything. Which raises the cost of making everything. Which pushes up inflation broadly. And when inflation rises, central banks are less likely to cut interest rates. In fact, several may now hold or even raise rates.

And gold, despite being called an inflation hedge, actually struggles in high interest rate environments. Because gold pays you nothing. No dividend, no coupon, no yield (except for the Indian Sovereign Gold Bonds). When a bond or a fixed deposit is paying you 5%, holding gold feels expensive. So investors sold.

Moreover, the US dollar posted its sharpest single-day gain since May 2025 on Tuesday (3rd March), rising 1.1% against major currencies. A stronger dollar makes dollar-priced gold more expensive for everyone holding other currencies, which suppresses demand further.

The good news, if you can call it that, is that most analysts expect this dip to be temporary. JP Morgan has a year-end gold target of $6,300 an ounce. Goldman Sachs estimates gold could rise 15 to 25% from pre-war levels if the disruptions persist.

What the Rest of the Bullion Market Did

Gold grabbed all the headlines, but the rest of the precious metals market had a rough week too.

Silver, which often moves alongside gold, initially rallied on Monday. Then it fell 6.6% on Tuesday to $83.50 an ounce,(as per Reuters) after touching a four-week high the day before. Silver is up about 16% this year overall, but the Tuesday sell-off was brutal.

The reason silver got hit harder than gold is that silver is not purely a safe haven asset. A significant portion of global silver demand comes from industrial uses, including electronics, solar panels, and electric vehicles. When markets start pricing in an economic slowdown, driven by high oil prices squeezing growth, silver suffers on two fronts at once. Investors flee to safety, and industrial demand expectations fall simultaneously.

The broader picture, though, is that gold and silver had all posted strong gains earlier in the year, so Tuesday's moves were partly a correction from elevated levels.

What History Says Will Happen Next

Now here is where things get genuinely interesting.

The first day is essentially a coin flip in terms of predicting where things go.

Consider June 2025, just nine months ago, when Israel and Iran had their 12-day war. Brent crude jumped 7.3% on day one of that conflict. After 30 trading days, it was actually down 0.6%. Gold rose 1.49% on day one and fell 1.39% over the following month. The S&P 500 dropped 1.13% on day one, then rose 5.7% after a month, as per Yahoo Finance.

The same pattern with Russia's invasion of Ukraine in 2022. Oil spiked more than 34% in the opening days. After 30 trading days, it was up just 1.5%. Oil peaked roughly a week after the invasion began.

Even after September 11, 2001, gold spiked 6.85% on the first trading day, then settled to a more moderate 2.28% gain over the full month.

There is, however, one exception that every analyst keeps coming back to: Kuwait 1990.

When Iraq invaded Kuwait in August 1990, oil rose 11.64% on day one and then kept rising, ending up nearly 57% higher after 30 trading days. The S&P 500 fell more than 10% over the same period. That conflict was different because it directly threatened Gulf oil infrastructure for months, with no quick resolution.

The question that is keeping energy traders up at night right now is a simple one. Does 2026 look more like every conflict since 1990, where prices spike and then normalise, or does it look like 1990 itself, where they just kept going?

Why This One Might Be Different

There are a few reasons this conflict stands out.

The death of Khamenei, who had led Iran since 1989, creates a genuine political vacuum. Iran's system is institutionalised enough that it will not collapse, but the path to any negotiation or ceasefire is murkier than in past conflicts where leadership continuity existed.

More importantly, this is not just a risk premium sitting on top of otherwise intact supply chains. Physical barrels are genuinely not moving. Iraq is curtailing output because storage is full. Qatar has suspended LNG exports. Saudi Arabia's largest domestic refinery is offline after a drone strike. As energy analytics firm Kpler put it, crude products, LPG, and LNG are all simultaneously affected.

The Houthi forces in Yemen have also resumed attacks on Red Sea shipping, meaning both Hormuz and Suez face disruption at the same time. Ships rerouting around Africa's Cape of Good Hope add weeks to journey times and millions to freight costs.

President Trump, meanwhile, has said the war could last four to five weeks, or possibly longer. That timeline matters enormously. A two-week conflict ending in a ceasefire is a completely different story from a two-month one.

What Central Banks Are Now Doing

This is where the story hits closer to home for most people, even those far from the Gulf.

Central banks around the world were in the middle of cutting interest rates to support slowing economies. The US Federal Reserve was expected to cut rates at least twice this year. The European Central Bank was expected to keep easing. Several Asian central banks were in similar positions.

All of that has now changed.

Former US Treasury Secretary Janet Yellen said the conflict puts the Fed "even more on hold, more reluctant to cut rates than they were before this happened." US inflation was already at 2.4% in January, above the Fed's 2% target, and Trump's tariffs were already expected to push it higher.

The European Central Bank is caught in what ING economists called "a genuine dilemma." Oil prices rising further would push already sticky inflation higher at the same time as the broader European economy weakens. Raising rates to fight inflation while the economy is struggling is not a pleasant position to be in.

In Asia, the impact would be sharpest in countries that import most of their energy from the Gulf, namely China, India, Japan, South Korea, and several Southeast Asian nations. Goldman Sachs estimates that under a six-week Hormuz closure with oil at $85 a barrel, inflation across Asian economies could rise by around 0.7 percentage points. Thailand, Singapore, and South Korea, with higher energy weightage in their inflation calculations, would feel it most.

Nomura expects Malaysia, as a net energy exporter, to actually hike rates. The Philippines may now hold rates instead of cutting them as previously expected.

The Takeaway

Wars are almost always bad for most people and most assets. They are sometimes, briefly, good for oil prices. And they almost always look more terrifying in the first week than they do a month later.

Markets, for now, are just left guessing.