Buy the fear? Data shows Indian markets delivered strong 2-year returns after past wars even as West Asia tensions roil stocks

Indian equity benchmarks were trading sharply lower on Wednesday as escalating tensions in West Asia rattled global markets and pushed crude oil prices higher. But amid the volatility, historical data from past conflicts suggest that market drawdowns during geopolitical shocks have often been followed by strong medium-term recoveries. Benchmark indices Sensex and Nifty were under pressure in line with weakness across Asian markets. The sharp escalation between the United States and Israel on one side and Iran on the other, along with reported damage to key energy infrastructure, has triggered one of the most serious supply disruptions in recent years. Sumit Pokharna, VP – Fundamental Research at Kotak Securities, said the situation has turned into a material global risk event. The Islamic Revolutionary Guard Corps has announced the closure of the Strait of Hormuz, warning that vessels attempting to pass would be targeted. Around 20 million barrels per day of crude oil and nearly 86 million tonnes per annum of LNG move through the Strait, accounting for roughly 27% of global oil trade and 20% of global LNG trade. While a prolonged shutdown may be unlikely, even a disruption lasting a few weeks could cause significant market dislocation. Early signs of stress are visible, with Qatar reportedly shutting its LNG plants, raising concerns over supply continuity. India remains structurally exposed to such disruption. Around 50–55% of the country’s crude oil and LNG imports transit through the Strait of Hormuz. Strategic petroleum reserves cover only about 8–9 days of oil demand, and there are no similar reserves for natural gas. If the disruption extends, supply-side pressures could intensify quickly, with the possibility of gas rationing in the near term. Live Events Against this backdrop of fear, market expert Jiten Parmar highlighted historical return patterns following major global conflicts. In a post accompanied by a data table on two-year returns after three wars since 2000, Parmar argued that "behavior decides returns" and that investors often need to overcome fear during such phases. The data show that after the Iraq War began in March 2003, the Nifty 50 delivered a 110.2% return over the subsequent two years. Midcap and smallcap indices outperformed even more sharply, rising 218.5% and 248.1%, respectively, during the post-dotcom recovery and capex cycle. Following the Russia-Ukraine conflict in February 2022, the Nifty rose 30.5% over the next two years, while midcaps gained 62% and smallcaps 58.4%, aided by post-Covid liquidity and earnings recovery. After the Israel-Hamas conflict in October 2023, the Nifty returned 28.2% over two years, with midcaps and smallcaps rising 45.6% and 39.1%, respectively, as of March 2026. Parmar said the data “speaks for itself” and expressed confidence that the current phase could follow a similar trajectory over time, though he acknowledged that overcoming negativity during such periods is not easy. The key difference this time is the direct energy channel. Unlike localized conflicts, the current escalation involves a chokepoint that handles a significant share of global oil and gas flows. If crude prices remain elevated for an extended period, the inflation, currency and fiscal impact on India could be more severe than in prior episodes. For now, markets are reacting to immediate risks—higher oil, potential supply shortages and rising volatility. But history suggests that once uncertainty peaks and supply flows stabilize, equities have tended to recover over a multi-year horizon. Whether this cycle repeats will depend less on headlines and more on duration—specifically how long energy flows remain disrupted and how quickly macro stability is restored. 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