Markets fear uncertainty more than war: How to navigate geopolitical crises

including the temporary ceasefire in West Asia, have once again shown how quickly sentiment can shift once the immediate risk of escalation eases.History shows that once the contours of a geopolitical crisis become clearer, markets often stabilize and recover.Whenever geopolitical tensions escalate, investors instinctively ask: what is the worst that could happen? Could the conflict spiral into something larger, like a global confrontation? Such fears are not irrational.History offers a useful perspective. Wars, crises and geopolitical rivalries have repeatedly unsettled markets, but they have rarely derailed long-term wealth creation.During the Gulf War in 1990, global equity markets fell sharply when Iraq invaded Kuwait, and oil prices surged.

Yet markets recovered within months once it became clear that the conflict would remain contained.Similarly, the aftermath of the attacks on 11 September 2001 in the US triggered panic across financial markets. However, within a year markets had largely stabilised as the economic impact became clearer.During the Iraq war in 2003, markets declined sharply in the months leading up to the conflict.

But once the war began and uncertainty decreased, equities rebounded strongly.These episodes demonstrate an important truth: markets often react sharply before or at the onset of conflict, when uncertainty is at its peak. Basically, the greatest market risk during geopolitical crises lies in how events might escalate.When geopolitical risks intensify, markets tend to price in worst-case scenarios.

Investors demand higher risk premiums, and asset prices adjust accordingly.This phenomenon creates what can be described as an ‘uncertainty discount’. The recent cooling of oil prices and the