War challenges the instincts of even experienced expatriates who assume markets collapse during geopolitical conflicts. However, historical evidence suggests otherwise. Markets have shown resilience during wartime and often recover faster than predicted. They create opportunities for those who understand the patterns, such as identifying undervalued assets or sectors that benefit from wartime conditions.
Your unique position as an expatriate adds complexity to investment decisions during uncertain times, as you must navigate factors such as currency exposure, differing regulations, and local market dynamics that can significantly impact your investment strategy. Currency exposure, geographic considerations, and access to various markets require a tailored approach that balances protection with growth potential, especially for expatriates who may face unique challenges in navigating these factors during uncertain times.
We’ll walk you through how war affects global markets and sectors that thrive during conflicts. You’ll find practical steps for building a resilient portfolio. You’ll find strategies for investing during wartime, including investing in real estate during war, designed for expatriates navigating 2026’s geopolitical landscape.
How War Affects Global Markets and Your Investments
Historical Market Performance During Conflicts
The data reveals a pattern that contradicts common assumptions about investing during war. The S&P 500 index shows an average drawdown of just 4.6% following major geopolitical events. Historical examples back this assertion up. Markets rebounded strongly after the Pearl Harbour attack and the Cuban missile crisis. From January 1993 to December 2025, the US stock market delivered an average annual return of 11.5%, despite multiple regional conflicts disrupting global stability.
Recovery Patterns After Geopolitical Events
Markets recover within about six weeks after conflict-driven sell-offs. Even more compelling, one year after major geopolitical events, markets often experience double-digit gains. This demonstrates the temporary nature of conflict-driven declines. The recovery phase happens faster than most expatriates expect and creates a window where excessive pessimism may present opportunities for those prepared to act, particularly in sectors that typically rebound quickly, such as technology and consumer goods.
Why Markets Bounce Back Faster Than Expected
Financial analysts identify what they term the “war puzzle”. Unexpected conflicts generate greater market volatility compared to predicted ones. But evidence suggests investors have become more accustomed to geopolitical shocks, leading to more muted market reactions than in previous decades. This adaptation means initial sell-offs may occur, but the recovery phase accelerates as investors reassess fundamentals.
Key Risk Factors for Expatriates in 2026
The Strait of Hormuz remains a critical vulnerability. About 20% of the world’s oil supply passes through this chokepoint and creates the possibility for sharp oil price spikes that ripple through global commodity markets. For expatriates, this situation creates both risks and opportunities. GCC countries possess sufficient buffers to withstand short-term shocks, with long-term fundamentals remaining strong. This regional stability, combined with possible benefits from higher commodity prices, positions expatriates uniquely when investing during wartime compared to investors in other regions, particularly in sectors such as defence, energy, and commodities that tend to thrive under such conditions.
Sectors That Perform Well During War
Clear patterns emerge when you analyse sectoral performance during conflicts. Certain industries benefit from wartime dynamics, while others face major headwinds, such as defence contractors and technology firms that provide military equipment and services.
Energy and Oil Companies
Energy companies, especially upstream oil and gas producers, benefit from wartime dynamics by a lot. Higher crude prices boost profitability for these companies and make them attractive positions during Middle East conflicts. Supply disruptions create favourable prices for energy producers.
This sector alignment offers advantages for expatriates in the GCC region. Higher oil prices could benefit commodity-exporting countries and create dynamics where regional economic conditions may improve during periods of global energy uncertainty.
Defense and Military Contractors
Defense-sector companies are seeing increased orders as governments ramp up military spending in response to geopolitical tensions. Both defence and energy stocks showed strong performances during wartime periods due to increased demand for their products and services. Government contracts expand as nations strengthen their security capabilities.
Precious Metals and Gold
Precious metals serve as safe-haven assets during wartime environments. Investors flock to gold when uncertainty rises and drive prices higher. These assets provide portfolio stability when traditional equities face pressure from geopolitical events, as they often retain or increase in value when markets are volatile due to conflict or instability.
Essential Commodities
Sectors linked to commodities and national security spending tend to perform well during wartime. Industrial metals are critical for defence manufacturing. Supply chain concerns during conflicts often push commodity prices higher and benefit producers in these markets.
Sectors to Avoid During Wartime
Airlines and aviation-related companies face major pressure during periods of elevated oil prices. These industries depend heavily on crude oil derivatives and experience earnings compression when input costs rise due to geopolitical tensions.
The chemicals sector relies heavily on crude oil derivatives. Rising input costs during conflict-driven oil price spikes can impact profitability margins, leading to reduced earnings and potential layoffs in the workforce. Both sectors struggle when energy prices climb and become vulnerable holdings during wartime investing, particularly because their profitability is closely tied to the fluctuations in oil prices and the overall economic instability that accompanies such conflicts.
Building a War-Resistant Investment Portfolio
Portfolios that withstand geopolitical shocks require spreading risk across multiple dimensions and capitalising on wartime opportunities.
Geographic Diversification Strategies
Geographic diversification spreads investments across different countries and regions. This helps mitigate the risks associated with local conflict or regional instability. Expatriates need to balance regional opportunities with global exposure. The GCC region offers strong fundamentals and benefits from higher commodity prices, yet global diversification remains necessary. The GCC consists of six countries in the Arabian Peninsula that collaborate on economic and political issues. The six Arabian Peninsula nations that make up the GCC work together on political and economic matters. Emerging markets in the GCC region have strong economic conditions even though there have been recent withdrawals of riskier investments, and they offer good opportunities when combined with investments in developed markets, especially in areas like technology and renewable energy, which are likely to grow a lot in the next few years.
Asset Class Mix for Stability
Different asset classes respond differently to geopolitical events. Equities, bonds, commodities and real estate provide resilience against market fluctuations and create multiple return sources. Real estate investment trusts offer inflation protection, especially valuable during wartime. Sector diversification ensures portfolio performance isn’t overly dependent on any single industry’s fortunes. This matters when certain sectors face headwinds while others benefit from similar geopolitical conditions, such as when energy companies thrive during conflicts that disrupt oil supplies while technology firms may struggle due to reduced consumer spending.
Maintaining Long-Term Focus
Time in the market beats timing the market. Attempts to predict short-term movements during volatile periods typically result in missed opportunities during recovery phases, as investors may sell off assets at a loss instead of holding through the volatility to benefit from subsequent market rebounds. Market prices often reflect expectations about geopolitical events. Conflict risk gets priced into securities. Focus on identifying situations where market pricing doesn’t fully reflect actual risks, such as when geopolitical tensions are underestimated or when excessive pessimism creates opportunities, like undervalued assets that may rebound once the situation stabilises.
Risk Management and Liquidity Planning
Flexibility in investment plans allows you to react to rapid changes and capitalise on dislocations, such as taking advantage of undervalued assets during periods of excessive pessimism or adjusting strategies in response to underestimated geopolitical risks. You should maintain adequate liquidity for opportunities during market dislocations. Avoid over-concentration in illiquid assets. Establish rebalancing protocols that respond to major market movements. Monitor Brent crude prices, reflecting Middle East supply dynamics; Strait of Hormuz shipping data for immediate impact; defence spending announcements; and USD strength, which affects emerging markets.
Portfolio Allocation Guidelines for Expatriates
Foundation Holdings (60-70%): Globally diversified equity index funds and investment-grade bonds for stability.
Tactical Positions (20–30%): Overweight in upstream producers in the energy sector; exposure to well-known manufacturers in the defence sector; allocation to precious metals; and select positions in GCC emerging markets.
Liquidity Reserve (10-20%): Cash equivalents, short-term government securities; and money market funds for flexibility.
Practical Investment Steps for Expatriates in 2026
Strategic implementation separates successful wartime investing from reactive decision-making. Your expatriate status in 2026 calls for specific action steps.
Core Holdings Structure
Globally diversified equity index funds are the foundations of your portfolio. You should pair these with investment-grade bonds to create stability during volatile periods. This 60-70% allocation anchors your portfolio against geopolitical shocks and maintains growth potential.
Tactical Positioning Opportunities
You should allocate 20–30% toward sectors that benefit from conflict dynamics. Overweight upstream energy producers that capitalise on supply concerns and include defence manufacturers experience increased government contracts, as these sectors are likely to see significant growth due to heightened geopolitical tensions and increased military spending. Precious metals provide safe-haven protection. GCC emerging market positions offer regional exposure with strong fundamentals, which are the underlying economic strengths that support growth and stability.
Investing in Real Estate During War
Real estate investment trusts deliver inflation protection during wartime. REITs provide portfolio diversification and offer potential income streams that are less related to equity market volatility, which can be particularly beneficial during periods of economic uncertainty and conflict because they may help stabilise overall investment returns.
Monitoring Key Economic Indicators
You need to track Brent crude prices that reflect Middle East supply dynamics. Strait of Hormuz shipping data provides immediate market signals. Defence spending announcements and US dollar strength affect emerging markets. These indicators guide tactical adjustments.
When to Rebalance Your Portfolio
You should establish protocols that respond to major market movements. Keep liquid assets to exploit opportunities during dislocations and avoid over-concentration in illiquid assets. Flexibility allows you to act when market pricing does not reflect actual risks or when excessive pessimism creates opportunities.
Final Thoughts
Wartime markets offer opportunities rather than just threats when you approach them with strategy. History shows recovery happens faster than most expect, typically within six weeks of original sell-offs. Your expatriate position gives you unique advantages, especially when you’re in the GCC region, where higher commodity prices can benefit local economies.
Build a diversified portfolio with 60-70% in core holdings and 20-30% in tactical positions that benefit from conflict dynamics. Maintain liquidity to capture opportunities that emerge during market dislocations.
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