War, oil and markets: What history tells us

Last Feb. 28, the United States and Israel launched attacks against Iran, sharply escalating geopolitical tensions.

In response, local stocks retreated as investors pivoted toward traditional safe-haven assets like gold, cash and the US dollar.

Airlines and net importers faced the steepest declines, pressured by the dual threat of rising oil prices and a weakening peso. Interest rates also climbed as the market began pricing in higher inflation expectations.

Lessons from history

While the market is likely to remain weak and interest rates elevated in the near term, historical data suggests this trend may be short-lived.

To provide context, we analyzed market behavior during three major conflicts involving oil- producing nations: The Gulf War (1990), the Iraq War (2003) and the ongoing Russia-Ukraine War (2022).

Our findings revealed the following patterns across the three cases:

• Oil price volatility: Oil prices spiked between 31.6 percent and 74.9 percent from the onset of tension to their peak.

However, these peaks were reached quickly—typically within just two to four months.

• Rapid normalization following the initial shock: In two out of the three cases, oil prices retreated to levels lower than their prewar start dates within 12 months.

This suggests that if oil prices peak and subside rapidly, long-term inflation should not remain a primary concern.

•  Market sell-off—opportunity or risk?: Both the US and Philippine markets fell immediately following the start of these wars.

Across the three cases, the US market saw an average drop of 14.8 percent, while the Philippine market showed more volatility, with declines ranging from 7.6 percent to 45.3 percent.

More importantly, market bottoms were reached within the same two-to-four-month window that oil prices peaked.

Although six- and 12-month returns were mixed, markets were more often up than down.

Most notably, in every historical case, prices 12 months later were significantly higher than their immediate postwar lows.

See Also

Remolona: PH facing dual pressure from oil surge, remittance risk

The bottom line: While the immediate reaction to the US–Israel–Iran conflict has sparked panic, history suggests that the window of extreme volatility is often brief.

In past episodes, oil prices typically peaked and stock markets bottomed within two to four months of the initial shock.

With this in mind, investors should resist the urge to sell into fear.

Instead, heightened uncertainty can be used as an opportunity to prepare for selective accumulation.

History shows that markets tend to recover relatively quickly, and returns are often positive in the months following postwar lows.

By staying disciplined and focusing on fundamentals, investors can take advantage of this opportunity once attention shifts back to underlying economic drivers.