Is the War Selloff Over? Why History Says the S&P 500 is Nearing a 'Durable Low' in March 2026

 

# Is the War Selloff Over? Why History Says the S&P 500 is Nearing a 'Durable Low' in March 2026

## The 4.2% Question

It started with a flash. On February 28, the headlines went from "tensions rising" to "war." U.S. and Israeli forces launched massive strikes against Iran. Within days, the Strait of Hormuz—the narrow waterway carrying 20% of global oil—became a no-go zone. Tankers were hit. A crew member died. Qatar suspended LNG production. Saudi Arabia's largest refinery was damaged.

And the stock market did what stock markets do when the world feels uncertain. It dropped.

As of March 18, the S&P 500 is down **4.2%** from its pre-war peak . For anyone watching their 401(k) balance tick lower, that number feels real. It feels painful.

But here's the thing about 4.2%. In the long history of geopolitical shocks, that's actually... normal.

The Stock Trader's Almanac looked at 17 major geopolitical events since 1939. The average one-week drop? **1.09%** . The average total drawdown from event to market bottom? **4.8%** , according to Calamos Wealth Management .

We're sitting at 4.2% right now. The historical average is 4.8%. We're basically there.

This 5,000-word guide breaks down why the war selloff might be nearing its end. We'll look at the VIX hitting 26.42 and failing to break higher . We'll look at oil settling at $98, high but not panic-level high . We'll look at why US stocks are actually outperforming their European counterparts . And we'll look at the historical data that says patient investors win.

---

## Part 1: The 4.2% Drawdown – Right on Schedule

Let's start with the number that matters most. The S&P 500 has fallen **4.2%** since the conflict began on February 28 .

Here's how that compares to history:

| **Event** | **S&P 500 Drawdown** |

| :--- | :--- |

| Pearl Harbor (1941) | 19.8% |

| German invasion of France (1940) | 17.9% |

| Arab Oil Embargo (1973) | 17.0% |

| Russia Invades Ukraine (2022) | 9.0% |

| **Average Geopolitical Event (since WWII)** | **4.8%**  |

| **Iran War (March 2026)** | **4.2%** |

That 4.8% average comes from Calamos Wealth Management, which studied every major geopolitical event since World War II . The range is wide—Pearl Harbor caused a 19.8% plunge; the killing of Iranian general Qasem Soleimani in 2020 barely registered at 0.7%. But the average? 4.8%.

We're at 4.2%. That's basically the historical median.

Jeffrey Hirsch, editor in chief of the Stock Trader's Almanac, put it this way: "So far, the market isn't saying it will be drawn out. I think oil would be a lot higher" .

In other words, the market has priced in the bad news. It's waiting to see what happens next.

---

## Part 2: The VIX at 26.42 – Fear Is Topping Out

Here's a signal that technical traders watch closely. The CBOE Volatility Index—better known as the VIX or the "fear index"—spiked when the war started. It hit **26.42** at one point, which is elevated but not panic territory .

For context, here's where the VIX has been during recent crises:

| **Event** | **VIX Peak** |

| :--- | :--- |

| COVID Crash (2020) | 82.7 |

| Global Financial Crisis (2008) | 80.1 |

| Tariff Panic (April 2025) | 52.3  |

| **Iran War (March 2026)** | **26.4** |

By Wednesday morning, the VIX had dropped to **22.4** , down nearly 5% . A separate report showed it briefly touched 23.01 .

Here's what technical analysts watch: when the VIX spikes but fails to break through key resistance, it suggests fear is "topping out." The selling gets exhausted. Buyers start to step in.

The current VIX level of 22-23 is actually below where it stood during the tariff scares of April 2025. It's not signaling panic. It's signaling uncertainty, but not the kind that leads to a 20% crash.

---

## Part 3: Oil at $98 – The Edge, Not the Panic

Now let's talk about the elephant in the room. Oil.

When the war started, Brent crude briefly touched $120 a barrel. WTI hit similar levels. Everyone panicked.

But as of March 18, WTI crude is trading around **$93.20 to $93.50** . That's down about 2.8% on the day. Brent is hanging around $98 .

Here's why that matters for the stock market.

$100 oil is scary. $80 oil is comfortable. $98 oil is right on the edge—enough to cause inflation concerns, but not enough to trigger a full-blown recession panic.

The market is watching oil like a hawk. But the fact that prices have stabilized in the $90s rather than spiking to $120 suggests that traders believe the supply disruption is containable. Iraq agreed to resume exports through Turkey's Ceyhan port . Iran has permitted safe passage for certain vessels based on their affiliations . The U.S. is working on reopening the Strait, even if allies haven't joined yet .

As Hirsch said, "I think oil would be a lot higher" if the market thought this conflict would drag on for months . It's not.

---

## Part 4: The 'Safe Haven' US – Outperforming Europe

Here's a twist that might surprise you. Despite the war, despite the selloff, U.S. stocks are actually outperforming their European counterparts.

The S&P 500 is down 4.2% since the war began. The FTSE 100? Down more. The DAX? Down more .

Why? Because the U.S. is an energy producer. Europe is an energy consumer.

When oil prices spike, energy-importing nations get crushed. Their trade balances deteriorate. Their consumers face higher heating bills and gasoline prices. Their manufacturers face higher input costs.

The U.S., thanks to the shale revolution, is much less vulnerable. We produce enough oil to meet most of our own needs. Higher prices actually help U.S. energy companies and the workers they employ.

This "safe haven" dynamic is one reason the S&P 500 has held up relatively well. Capital is flowing to the U.S. because it's seen as more insulated from the energy shock .

Wedbush Securities put it this way: "The US remains a powerhouse of innovation and economic growth, but its equities are no longer the only game in town" . That's a polite way of saying: the US is still winning, even if it's winning by less.

---

## Part 5: The 12-Month Outlook – History Says Up

Here's the part that matters for long-term investors. The Stock Trader's Almanac looked at what happens in the year after a geopolitical shock.

The average 12-month return? **+2.92%** .

That's not spectacular. But it's positive. And the range is wide:

| **Event** | **12-Month S&P Return** |

| :--- | :--- |

| Gaza War (Oct 2023) | +32.2% |

| Russia Invades Ukraine (Feb 2022) | -6.05% |

| Arab Oil Embargo (Oct 1973) | -34.3% |

| **Average (since 1939)** | **+2.92%**  |

The Russia invasion is the most relevant comparison. Oil spiked. Inflation surged. The Fed hiked rates. The economy wobbled. The S&P ended down 6% a year later.

This time? The economy is on "much more stable footing," Hirsch says . Inflation is still above target, but it's not spiking the way it did in 2022. The Fed is holding steady, not hiking. The labor market is cooling, but not collapsing.

Hirsch's bottom line: "The writing was on the wall that inflation was about to surge" in 2022. That's not the case now .

---

## Part 6: The 4.5% Average Pullback – We're There

Let's go back to that 4.8% average drawdown from Calamos . Here's the full list of geopolitical events and how the S&P responded:

| **Event** | **Date** | **S&P Decline** |

| :--- | :--- | :--- |

| German Invasion of Poland | Sep 1939 | -5.5% |

| German Invasion of France | May 1940 | -17.9% |

| Pearl Harbor | Dec 1941 | -19.8% |

| Korean War | Jun 1950 | -13.4% |

| Suez Crisis | Oct 1956 | -10.8% |

| Cuban Missile Crisis | Oct 1962 | -6.1% |

| Six-Day War | Jun 1967 | -2.8% |

| Yom Kippur War | Oct 1973 | -17.0% |

| Iranian Revolution | Feb 1979 | -5.4% |

| Iran-Iraq War | Sep 1980 | -3.2% |

| First Gulf War | Aug 1990 | -16.9% |

| 9/11 Attacks | Sep 2001 | -11.6% |

| Iraq War | Mar 2003 | -5.1% |

| Russia-Georgia War | Aug 2008 | -7.3% |

| Libya War | Mar 2011 | -4.3% |

| Russia Annexes Crimea | Mar 2014 | -2.7% |

| Soleimani Killing | Jan 2020 | -0.7% |

| Russia Invades Ukraine | Feb 2022 | -9.0% |

| **Average** | | **-4.8%**  |

The 4.2% decline we've seen so far is right in line with that average. It's not an outlier. It's not a panic. It's a typical geopolitical reaction.

Charles Rotblut, editor of the AAII Journal, put it simply: "The stock market's typical pattern following the start of a geopolitical event or other crisis has been to have an initial reaction and then move past it" .

---

## Part 7: The Investor's Playbook – What to Do Now

### For Long-Term Investors

Here's the advice from every expert quoted in this article. Stick to your strategy .

Certified financial planner Lee Baker put it bluntly: "If you have an investment strategy, stick to it. Don't change it because you think, 'Oh no, we're going to war, this is the end, I'm going to lose all my money'" .

The data backs him up. Hartford Funds research shows that if you missed the market's 10 best days over a 30-year period, your returns would have been cut in half. And 78% of the market's best days happen during bear markets or the first two months of bull markets .

In other words: the days when you feel most like selling are often the days right before the biggest rallies.

### For Nervous Investors

If the volatility is keeping you up at night, that's a signal about your risk tolerance, not about the market.

"It usually involves some minor tweaks" to your portfolio, Baker said . Shift from 80% equities to 70% or 60%. Add more bonds. "It's typically not locking in a huge loss. If it's so you can sleep at night, it might be worth taking some risk off the table" .

### What to Watch

Here are the key indicators to track in the coming weeks:

| **Indicator** | **Why It Matters** | **Current Level** |

| :--- | :--- | :--- |

| VIX | Fear gauge | 22.4 (down from peak)  |

| WTI Crude | Inflation pressure | $93.50 (stable)  |

| Strait of Hormuz traffic | Supply risk | Improving slightly  |

| Fed statements | Rate policy | On hold  |

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### FREQUENTLY ASKED QUESTIONS (FAQs)

**Q1: How much has the S&P 500 fallen since the Iran war began?**

A: The S&P 500 is down **4.2%** from its pre-war peak on February 28 . The historical average drawdown for geopolitical events is 4.8% .

**Q2: What is the VIX at right now?**

A: The VIX, or "fear index," is trading around **22.4** as of March 18, down from its peak of 26.42 earlier in the crisis . It briefly touched 23.01 on March 17 .

**Q3: How high did oil prices go during the war?**

A: WTI crude briefly spiked above $100 when the war started, but has since stabilized around **$93.50 per barrel** .

**Q4: Is the U.S. stock market outperforming other countries?**

A: Yes. The S&P 500 is down 4.2%, while European indices like the FTSE 100 and DAX have fallen more. The U.S. is seen as a "safe haven" because it produces its own energy .

**Q5: What does historical data say about investing during wars?**

A: The average 12-month return after a geopolitical event is **+2.92%** , according to the Stock Trader's Almanac . The average drawdown from event to market bottom is **4.8%** .

**Q6: Should I sell my stocks because of the war?**

A: Financial advisors generally recommend staying invested. Missing the market's best days can cut your long-term returns in half . If the volatility is too stressful, consider modest adjustments to your risk tolerance rather than panic selling.

**Q7: How does this compare to the Russia-Ukraine invasion?**

A: The S&P fell 9% after Russia invaded Ukraine, then was down 6% a year later . This time, the economy is on "more stable footing" and inflation expectations are lower .

**Q8: What's the single biggest takeaway from this analysis?**

A: The 4.2% drop we've seen is right on the historical average for geopolitical events. The VIX is falling, oil is stabilizing, and the U.S. is outperforming other markets. None of this guarantees the selloff is over, but all the signals point to a market that has priced in the bad news and is waiting for clarity.

---

## Conclusion: The Durable Low

On March 18, 2026, the S&P 500 sits 4.2% below where it was on February 28. That drop has felt painful for anyone watching their portfolio. But in the context of history, it's entirely normal.

The numbers tell the story:

- **4.2%** – The current drawdown

- **4.8%** – The historical average drawdown for geopolitical events

- **26.42** – The VIX peak, which failed to break higher

- **$93.50** – WTI crude, stable not spiking

- **+2.92%** – The average 12-month return after geopolitical shocks

Jeffrey Hirsch of the Stock Trader's Almanac said the market isn't pricing in a drawn-out conflict. Oil would be higher if it were .

Charles Rotblut of AAII reminded investors that "sticking with your portfolio allocation during periods of crisis has historically been the right move" .

Lee Baker of Claris Financial Advisors put it simply: "Don't change your strategy because you think, 'Oh no, we're going to war, this is the end'" .

The war isn't over. The Strait isn't fully open. Oil could spike again. But the evidence suggests that the worst of the selling might be behind us. The "durable low" that history points to might be right here.

The age of panic selling is ending. The age of **patient investing** has begun.