Buying Fear: What History Says About Investing During War
The moment everyone else panics is often the moment the best opportunities are born.
The headlines right now are loud.
The Iran conflict. Oil near $100 a barrel. The Strait of Hormuz. A ceasefire that feels fragile. Retail investors moving to cash. Financial media playing its favorite game: catastrophizing.
And somewhere in the middle of all this noise, Warren Buffett’s most famous rule is being put to the test. Again.
“Be fearful when others are greedy, and be greedy when others are fearful.”
He wrote those words in a 2008 New York Times op-ed as the global financial system was in freefall. At the time, the advice seemed almost reckless. In hindsight, it was the most important investing memo of the decade.
Today, fear is back.
The question is: what does history actually say about investing when it is?
This Is Not a New Story
Every generation of investors believes “this crisis is different.”
“This time, the damage will be permanent. This time, the market won’t bounce back.” We’ve all heard it.
It is a very human instinct. And it is almost always wrong.
Since World War II, the list of crises is long: Pearl Harbor. The Korean War. The Cuban Missile Crisis. The Gulf War. September 11. Each time, it felt like the world might actually end.
Each time, it didn’t.
According to historical analysis by LPL Research, the S&P 500 has experienced an average decline of roughly 5% following geopolitical shocks, with markets typically bottoming in about three weeks and recovering within one to two months.
Three weeks. That is the average time it takes for the market to process a major geopolitical crisis and start recovering.
Think about that the next time you are tempted to hit sell.
The Numbers You Actually Need to See
Let’s go deeper, because the data here is more compelling than most investors realize.
Since 1980, the S&P 500 has delivered an average return of over 11% in the 12 months following major geopolitical shocks.
And, specifically in armed conflict, research found that the S&P 500 was up approximately 24.9% on average in the year following every war the U.S. was directly involved in since World War II.
Read that number again.
Up nearly 25%, on average, in the year after a conflict began.
Not every war. Not every crisis. But the broad pattern is overwhelming: investors who stayed the course were rewarded. The ones who sold in panic locked in losses and missed the recovery.
A few examples that stick:
During the Cuban Missile Crisis in October 1962, as the U.S. and Soviet Union stood at the brink of nuclear war, the S&P 500 fell about 7% in the first few trading days. Once the crisis de-escalated, markets recovered those losses in just over two weeks.
After September 11, 2001, U.S. markets were closed for several days. When trading resumed, the S&P 500 dropped about 11% in the first week. Within roughly a month, the losses were fully recovered.
The pattern is consistent. And it is hard to ignore.
The One Exception Worth Knowing
No honest analysis leaves out the bear case.
There is one historical episode that breaks the pattern. And it is directly relevant to what is happening today.
The Arab oil embargo of 1973.
J.P. Morgan’s research found the 12-month real S&P 500 return after that shock was deeply negative, approximately 37% down in real terms over the following year.
Why was 1973 different? Because the oil shock was not temporary. Supply stayed tight for years. The result was stagflation: high inflation paired with deteriorating economic growth. Oil prices essentially stopped the economy from functioning efficiently for nearly a decade.
That is the real risk investors need to be watching right now. Not the war itself. Not the headlines. But whether this becomes a sustained energy shock, or whether supply normalizes.
The ceasefire is fragile. The IEA has warned that April supply disruptions could exceed March’s. Brent crude is still near bouncing between $100 and $110.
The bull case depends on the conflict staying short. The bear case is a drawn-out war that keeps oil elevated long enough to bite into corporate margins and consumer spending.
The key distinction, as J.P. Morgan puts it, is a fast spike that fades versus a sustained rise that tightens financial conditions. Sustained oil strength acts like a tax on consumers, pushes inflation expectations higher, and increases pressure on central banks.
That is how geopolitics can become macro.
But Here Is What the Market Is Telling You Right Now
Here is the part most investors are missing.
Even with a war in the Middle East, even with oil elevated, even with a fragile ceasefire and real uncertainty, the underlying fundamentals of Corporate America look remarkably strong.
According to FactSet, the S&P 500 is projected to report earnings growth of 13.2% for Q1 2026. If that holds, it will mark the sixth consecutive quarter of double-digit year-over-year earnings growth.
Six straight quarters of double-digit earnings growth. During a war.
BlackRock added that technology profits are expected to grow 45% this year, yet the sector has barely moved. That has pushed tech valuations to their lowest relative level since mid-2020.
This is what Buffett and Peter Lynch have always said: stock prices are driven by fear and greed in the short term, but by earnings in the long term. When fear pushes prices down while earnings stay strong, that is the definition of an opportunity.
Morgan Stanley summarized it cleanly this week: accelerating earnings are protecting the S&P 500 from deeper losses.
The market is volatile. The businesses behind it are still growing.
What Buffett Would Actually Do
Here is the honest truth about Buffett’s famous quote: it is easy to repeat and hard to act on.
When he wrote those words in 2008, he was not just dispensing advice. He was buying. Aggressively. He wrote:
“I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.”
He put his money where his mouth was. At the scariest possible moment.
But there is an important nuance that gets lost in the retelling.
Buffett was not buying everything. He was buying quality. Businesses with durable earnings, real competitive advantages, and the ability to survive whatever came next. As he has said before, whether socks or stocks, buy quality merchandise when it is marked down.
The same principle applies today.
This is not a moment to panic sell. But it is also not a moment to buy blindly. It is a moment to be selective.
Peter Lynch called this knowing the story. Before you add to any position in a volatile market, ask yourself one question: do I understand this business well enough to be confident it will be worth more in five years, regardless of what oil prices do in the next five months?
If the answer is yes, volatility is your friend. Not your enemy.
The Practical Takeaway
Let me make this concrete.
If you are a long-term investor, here is what the data and the history actually suggest you should do right now:
Do not sell into the fear. The average geopolitical shock produces a decline that reverses within weeks. Selling now means locking in losses and almost certainly missing the recovery.
Do not go all-in blindly either. The 1973 oil embargo is the cautionary tale. If the conflict drags on and oil prices remain structurally elevated, the macro picture becomes more complicated. Watch the ceasefire. Watch energy prices. Watch inflation data.
Use the volatility to add to quality. Earnings are still growing. Fear-driven price drops on fundamentally strong companies are opportunities in disguise. That is not spin. That is 80 years of market history.
Think in years, not weeks. The investors who made fortunes off every major crisis were not the ones who called the bottom perfectly. They were the ones who stayed calm, kept buying quality, and let compounding do the work.
The Bottom Line
War is scary. Headlines are loud. The natural human instinct is to protect what you have by doing nothing. Or worse, by selling.
But the market has survived every crisis in its history. Every war. Every recession. Every panic.
Motley Fool research found that if you had invested just $100 in an S&P 500 index fund on December 31, 1979, and weathered every recession since, that $100 would be worth more than $4,000 today on a total-return basis.
That is what staying in the game looks like over time.
The investors who will look back on April 2026 and wish they had acted differently are not the ones who stayed calm and kept buying quality. They are the ones who let fear make their decisions for them.
Buffett’s rule is simple. Following it is hard.
But the history of markets, across 80 years and dozens of crises, says the same thing every single time:
Fear is not a strategy. Patience is.
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