Been going around caulking the inside windows and ran into a bigger gap
It looks like it has been there since the dry wall was mudded and not something new. I would not expect water damage to look like that. I don't know what is the reason for the wall flex or if it is excessive. More than likely it was either a poor fit of the dry wall during installation or these are newer windows that were narrower than the originals. I suggest filling in with 'hot' mud which is a chemical set dry wall mud that is fast setting and won't shrink and crack