Market volatility as opportunity: How oil and global crises have historically rewarded long-term investors

In times of war, geopolitical tensions, and market volatility, investors often retreat to the sidelines, choosing caution over action. Yet, history shows that these very periods of uncertainty have often created some of the most rewarding opportunities for long-term investing.

According to a recent report by Tata AIA Life Insurance, investing during phases of uncertainty can work to the advantage of patient investors. “During crises, high-quality stocks are often available at attractive valuations amid selling pressure. This presents a good buying opportunity for prudent investors,” the report noted.

Citing events such as Operation Sindoor, and the Pulwama and Uri attacks, the report highlights that while markets often react negatively in the immediate aftermath, recoveries tend to follow—though not always in a straight line.

Historical data shows that after an initial correction, equities have delivered gains of up to 35% within a year, with returns in some cases exceeding 100% over a two- to three-year period. However, such rebounds are not always immediate, often requiring investors to stay patient through phases of consolidation.

As per the data, during the Kargil War, the markets declined in the run-up but rebounded strongly, delivering returns of 36% over the following year and 82% over five years. Similarly, after the Mumbai 26/11 attacks, gains gathered pace over time, with returns rising to 82% after one year and 120% over five years.

Similarly, in the case of the Uri attack, the markets saw short-term weakness but went on to deliver 15% returns over one year and doubled over five years. The Pulwama attack, too, had a limited immediate impact, with markets rising 13% over the next year and more than doubling over a five-year horizon. Even in the case of Operation Sindoor, early trends suggest only modest near-term fluctuations, reinforcing the market’s ability to absorb shocks.

Oil shocks and global crises

Global conflicts, particularly those linked to oil supply disruptions, have historically posed significant external risks for the Indian markets. For an economy heavily reliant on crude imports, such events tend to trigger immediate volatility across equities, currency, and inflation expectations. Yet, the longer-term trajectory has largely remained intact.

An analysis of the Nifty50 across major global conflicts reveals a consistent pattern: short-term dislocation followed by eventual recovery.

The Gulf War is a case in point. While volatility intensified in the months following the conflict, equities delivered 50% returns over one year and nearly tripled over five years. A similar trend played out during the Iraq War, where initial declines were followed by a strong rebound, culminating in 68% one-year returns and a remarkable 346% gain over five years.

However, not all recoveries have been swift. During the Libyan Civil War, market performance remained subdued in the near term, with only modest gains even after a year. Over a longer horizon, returns improved, but the pace of recovery was slower, highlighting the uneven nature of global shocks.

More recently, the Russia-Ukraine war once again demonstrated market resilience. Despite initial volatility, equities rebounded quickly and continued to post gains over the following year, with stronger returns visible over a two-year period.

Meanwhile, during the ongoing Middle East crisis, the Indian equities market has corrected by nearly 10% since the start of the U.S.-Israel-Iran conflict on February 27, wiping out an estimated ₹37 lakh crore of investor wealth amid heightened volatility and risk-off sentiment.

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