Why “War Winner” Trades Are Off Base

When war breaks out, pundits often push investors to react somehow. Some hype safe havens while others recommend trying to capitalize by picking stocks potentially benefiting from the war. The latest conflict is no exception, with some calling for buying Energy or Defense stocks while others push alleged havens like gold or Treasurys, among other things. But this whole line of thinking is short term and off base. The only basis to make an investment decision is when you know something others don’t, and given the ubiquitous coverage, there is virtually nothing about the Iran War yielding this.

Pundits often recommend buying oil and gas producers when the warring countries are involved in energy production (i.e., extraction, transportation, etc.). We saw these calls following Hamas’s attack on Israel, Russia’s invading Ukraine and throughout the 1990s and 2000s tied to both Iraq Wars—to name a few. Their reasoning is (overly) simple: War-related disruptions risk regional production, creating supply shortages and thus high oil prices—lifting energy companies’ earnings.

It isn’t just oil, though. Many also suggest investing in weapons, defense or cybersecurity stocks to capture governments’ rising wartime spending. For short stretches, while markets are still pricing war and war fears, it may seem to work. But that usually proves fleeting … and ends with no warning.

Meanwhile, others call for buying “safe haven” assets. Here, too, pundits typically rely on a surface-level explanation: Swapping some of your stocks for these assets supposedly “de-risks” your portfolio, mitigating downside if the conflict expands and markets sink. Those doing so don’t think they are speculating—they think they are being prudent. But if you need growth to finance your longer-term goals and needs, deviating from it is a ginormous risk. Especially when you have no real plan for re-entry into stocks, which in our experience most often hinges on some permutation of “when things feel better.”

Take note of this for all of time: There is no such thing as a safe haven investment. Repeat that. Make it your mantra. Get it in your bones. No. Safe. Haven.

Yes, some categories tend to hold up better in down markets. Bonds’ lower expected short-term volatility, for instance, can help mitigate some of stocks’ near-term wiggles. But not every time and it doesn’t mean they assuredly rise when stocks fall. For example, many associate US Treasurys with safety, since they are backed by the “full faith and credit” of America’s government. Yet 10- and 30-year Treasury yields are up since the Iran conflict’s start, meaning their prices fell.^[i] They contradicted their reputation.

Or consider two other popular “safe havens,” gold and silver. Those touting them miss the basic reality that both are more volatile than stocks with no real history of reliably zigging when markets zag. Despite their reputation, prices for both metals are down since the initial strikes on February 28.^[ii] (And they are down despite fears of high energy prices driving faster inflation, gutting another golden myth.) There is no such thing as an absolutely “safe” investment—full stop. All investments carry expected returns and risks. Thinking in terms of safety eschews that in favor of the incorrect perception downside is the sole risk investors confront.

But above all else, these “war winner” trades commit a basic error: acting on widely known information—factors baked into prices already. Markets are efficient discounters of public information, simultaneously pricing all widely known events, including fears and opinions of how they might evolve.

This time is no exception. Yes, yes, we know: People say markets should be down more! But that is an opinion. Let us, instead, consider what markets do show. Consider regional stock indexes. Since the war started, most talk has nominated major energy exporters as the likeliest winners—oil prices are up, and these link tightly to energy firms’ profits. Hence, of the MSCI All-Country World Index’s 47 members, oil-rich Norway, Saudi Arabia and Kuwait are in the top 10 performing nations since the war began. The US, the world’s largest oil producer, is just outside at 11^th, a big turnabout from its 40^th rank in 2025 through February 27. Markets know about the war in an oil-heavy region. They see constricted flows through the Strait of Hormuz—and priced it.

Conversely, energy-rich Qatar and the UAE, home to Dubai, are near the bottom. Why? Both have been adversely affected by the war directly. Qatar’s massive liquefied natural gas export terminal is and has been offline. It would struggle to capitalize on presently higher prices and is in Iran’s crosshairs. The UAE, long presumed a safe spot in the Gulf region, has been targeted repeatedly by Iran. Markets had to price all that in. So they lag.

Similarly, the bottom of the regional league table is dotted with importers across Asia, where most Gulf oil goes. As we noted earlier this month, Gulf-sourced oil disruptions have led these countries to ration energy to avoid potential shortages—some even implementing a four-day work week to do so.^[iii] This clearly weighs on economic output, which markets are discounting now.

So markets clearly aren’t unaware of war and its effects. The results show that. Hence, the right question investors should ask themselves: What do you know about these nations that others don’t, suggesting markets haven’t fully or correctly priced the war’s effects? Anything? If you can’t come up with a good answer, your basis to act is flimsy.

Beyond this, many extrapolate war conditions forward—a huge risk. First and foremost, regional conflicts rarely halt a big enough slice of global GDP to drive bear markets. Many investors don’t scale, automatically assuming the worst or acting out of fear or bias—which financial coverage doesn’t cure.

So here, too, ask yourself some questions if you consider acting. Like, what if the war unexpectedly stops and markets move on? Treaties and resolutions can pop up quickly and unexpectedly. Take 2006’s Israel-Hezbollah conflict, which lasted from July 12 – August 11 that year and ended abruptly after the UN Security Council unanimously adopted Resolution 1701.^[iv] US and world markets wobbled slightly after the initial outbreak, but bottomed on July 17 and 18, respectively.^[v] World stocks regained pre-war levels by July 28; US stocks on August 3.^[vi] They pre-priced the peace. Once it was signed, stocks kept pricing in the falling uncertainty, jumping the following week. By yearend, US and world stocks were up double-digits from pre-conflict levels.^[vii] Investors who tried trading around the war risked missing some or all of this bounce.

Or consider the first Gulf War. It started August 2, 1990—17 days into the shallow US bear market that accompanied the savings and loan crisis and associated recession (and about 8 months into a global bear market).^[viii] Yet a new bull market began on October 11 of that year, more than four and a half months before the war’s official end—before Operation Desert Shield even morphed to Desert Storm.^[ix] Mind you, European and UK stocks remained weaker for longer tied to the exchange rate mechanism (ERM) crisis, when Britain surprisingly dumped the link to the euro’s precursor, triggering a double-dip recession. None of this was connected to the war. But our point remains—markets can bounce at any time, they don’t always wait for a resolution, and the resolutions themselves aren’t predictable.

Overall, making big moves based on widely known and unpredictable information is likely to prove a mistake. In our view, markets reward discipline and patience—not blindly or emotionally trying to time portfolio moves.