We develop a novel estimation approach to consider political or economic shocks from third countries in bilateral trade relationships and estimate heterogeneous and persistent trade diversion effects caused by civil conflicts. Our estimation approach is derived from the structural gravity model of international trade and translates the triadic relationship between a conflict country and an exporter-importer pair into an estimable dyadic relationship. Our results indicate that importers divert trade flows from conflict countries to alternative export partners in the agricultural, manufacturing and minerals sectors, but not in the fuels sector. We further find that this trade diversion effect is persistent after civil conflicts resolve, and that trade diversion fosters market integration via RTAs among affected dyads. Our heterogeneity analysis emphasizes that firms with highly integrated supply chains are less likely to divert shipments and that diversion takes place immediately in the agricultural and manufacturing sectors, but only after long conflict spells in the minerals sector. Finally, we conduct a general equilibrium welfare analysis based on three case studies and find that civil conflicts lead to net welfare losses for all (indirectly) affected countries, even those exporters to whom trade flows get diverted. Our findings add to the discussion of the persistent economic costs of civil conflict. Finally, our estimation approach can be adapted to other frameworks where unilateral political or economic shocks in one country may affect the bilateral relationship between other countries.