War can have a complex and multifaceted impact on investing, and the effects depend on the nature of the conflict, its location, duration, and the sectors involved. It can also influence savings accounts and interest rates, making it an important consideration for those focused on financial planning and saving money.
Market volatility and investor behaviour
Wars often trigger sudden market volatility as investors react to uncertainty. Stocks can drop sharply, especially in affected regions or industries. Historical data from organisations such as the International Monetary Fund (IMF) shows that geopolitical events tend to increase short-term market volatility.
At the same time, investor behaviour tends to shift. Risk-averse investors often pull money from equities and move to safer assets like gold, government bonds, cash, or high interest savings accounts as part of a more defensive approach.
Impact on different sectors
War affects industries in different ways depending on their exposure and role in the global economy.
- Defence and Security: Companies in defence, cybersecurity, and related industries often see gains due to increased government spending.
- Energy: Wars in oil- or gas-producing regions can drive energy prices up, benefiting energy sector stocks but raising costs for energy-intensive industries.
- Travel and Leisure: Airlines, tourism, and luxury goods often suffer as conflict reduces consumer demand and disrupts logistics.
- Commodities: Food and raw materials can spike in price if the conflict disrupts supply chains, which can also impact inflation and best savings rates.
Currency and inflation impact
War can also affect currencies and inflation, which are important for both investors and savers.
- Currency Devaluation: Countries involved in or near the conflict often see their currencies weaken, which can hurt foreign investors and import-heavy businesses.
- Inflation: Higher costs for energy, commodities and transport can trigger inflation. Central banks such as the Bank of England and the US Federal Reserve have highlighted how geopolitical shocks can contribute to rising inflation and impact interest rates, including savings accounts’ interest rates.
Risk and safe-haven assets
During times of uncertainty, investors often look for stability and lower-risk options.
- Gold & Precious Metals: Historically, these rise during times of conflict as investors seek stability. Research by the World Gold Council shows that the demand for gold often increases during wars and times of geopolitical uncertainty.
- Government Bonds: Bonds from stable economies may see higher demand, lowering yields.
- Cryptocurrencies: Sometimes considered an alternative “digital safe haven,” though highly volatile.
As Andrew Fox, CEO of mybestbuysavings, explains: “War increases uncertainty in financial markets, but it also reinforces the importance of balancing investing with strong savings strategies and focusing on long-term financial stability, particularly when seeking the best savings rates.”
Summary
War generally increases market volatility and uncertainty. Safe-haven assets tend to perform well, while industries directly affected by conflict may suffer or benefit depending on their role (defence vs. tourism).
For those focused on saving money and finding the best savings rates or a high yield savings account, the long-term effects depend on reconstruction, geopolitical shifts and changes in global supply chains.
