Julian Knight BBC News Online personal finance reporter

Oil not an investment panacea

First there was the bursting of the telecoms and technology bubble.

Then there were accounting scandals at Enron and WorldCom.

Over the summer there has been the growing possibility of war in Iraq - a country with the world's second largest oil reserves, the lifeblood of the world economy.

The FTSE 100 has fallen by nearly a half from its high watermark at the turn of the millennium.

Making money

Some fleet-of-foot investors and financial market traders have turned the market's slide to their advantage by dipping in and out of stocks and making the most of any incremental rise or fall in prices.

The seat for safety has already been booked - over the last two years defensive stocks have been a bulwark, but how long can it last?

Justin Urquhart-Stewart

But the vast majority of private investors hold onto their shares for weeks, months or even years rather than minutes.

As a result, many have found that they have been strapped in tight for the market's downward spiral.

Traditionally, investors looking to find a little growth in a no-growth market have gone back to basics.

On the defensive

Billions has been invested into mining, utilities, oil and banking shares, so called 'defensive stocks'.

These industries may make some ethically minded investors break into a cold sweat, but they have traditionally provided a calm harbour safe from market storms.

However, this time the longevity and depth of the stock market downturn have prompted some experts to question whether the defensive stock ship has now sailed.

"The seat for safety has already been booked - over the last two years defensive stocks have been a bulwark, but how long can that last?" Justin Urquhart-Stewart, director of Seven Investment Management told BBC News Online.

Military action is not unanticipated. Oil prices already contain a war premium.

Merrill Lynch report

Jason Hollands, deputy managing director at BestInvest added: "Most fund managers have made the move to defensive sectors, crisis has been factored into pricing, therefore in many cases there is little room for growth."

Surely, though, with war with Iraq possible, oil companies are a place for investors to gain some much needed succour?

Again, the case seems far from cut and dried.

Price spike

A recent report by Merrill Lynch global securities research concluded that any military action was unlikely to prompt the sort of oil price spike that occurred at the start of the Gulf War in 1990.

Back then, oil prices rose from under $20 to over $40 a barrel within a few weeks of Iraqi tanks rolling into Kuwait City.

Doesn't matter what sector any business is in as long as it's growing. Strong fundamentals are key [as is] taking a long term approach

Mark Barnet Fund manager Perpetual UK

However, a summer of international tension has seen steady oil price rises.

As a result, according to Mike Hartnett, author of the Merrill Lynch report, "military action is not unanticipated. Oil prices already contain a war premium".

Even if oil prices were to spike, some financial market insiders doubt it would be a real boon for investors.

"Oil price rises soon feed back into oil company costs. In short, oil companies are better off when prices are rising at or just above inflation rather than facing a spike," Mark Barnet fund manager of Perpetual UK income & growth investment trust told BBC News Online.

Second guess

Mr Barnet said investing with more than one eye on international events is a dangerous game.

"Second guessing geo-political events is a sure way to get caught out," he said.

Instead, Mr Barnet argued that investors should forget about investing in defensive stocks for the sake of it.

"Doesn't matter what sector any business is in as long as it's growing. Strong fundamentals are key [as is] taking a long term approach," Mr Barnet told BBC News Online.

Mr Hollands added: "Shares in profitable companies have to be balanced with a portfolio of bonds, cash and property."