April monthly investment update - Reflections on March 2026

March 2026 has undoubtedly been one of the most turbulent months we’ve seen in recent years in terms of geopolitical events shaking the world economy and causing extreme volatility in global investment markets.

The US-Israeli war on Iran (which began on 28 February) has been the sole catalyst for this. President Trump’s aim to completely eradicate the threat of Iran’s capability to produce nuclear weapons saw the country come under siege by US and Israeli forces through a barrage of air attacks at targeted sites. Iran retaliated by launching a wave of missiles and drone strikes on several of its closest Gulf neighbours, including Saudi Arabia, Qatar, and the United Arab Emirates (UAE) where it feels there is a US presence.

The volatility in global investment markets has largely centred around the widely fluctuating price of energy during the month, particularly oil – crude oil reached its highest level in recent years due to there being less of it in circulation. This reflects Iran’s effective closure of the Strait of Hormuz in response to military action - creating a global energy crisis as oil tankers remain motionless in the Strait, and only a handful of vessels were allowed safe passage.

This critical stretch of waterway (which is 21-miles at its narrowest point) is situated between Oman and Iran. With around 20% of the world’s oil and liquefied natural gas (LNG) passing through it at any given time, it carries essential supplies for many economies across the world.

Investors’ sensitivities heightened

In uncertain times like these, it’s normal for investment markets to become ultra-sensitive to headlines that give any hope of attempts for resolution. Whenever the US President reached out for 'so called' diplomacy with Iran for a potential end to the conflict, global financial markets reacted with oil falling sharply and stock markets rising and vice versa.

In March, oil prices jumped around erratically with the price of a barrel of Brent oil going up to nearly $120, and as low as $90, on just one day during the month.

As the conflict dragged on, concerns were mounting that prolonged high oil prices could have a larger and longer‑lasting impact on inflation, raising the risk that 'sticky' global inflation could return, delaying a full return to normality.

Our Fund Managers believe that the upcoming US mid-term elections will act as a 'discipline' on President Trump, and the recently announced two-weeks’ ceasefire gives us some hope in our predictions. The higher fuel prices that Americans are now paying at the pumps will also become a bigger concern as the annual driving season gets underway in the States (from April to September) – a time when many Americans hit the road.

Unanimous thinking by world bank leaders

Some central banks, who may have foreseen rate cuts in 2026, have now pivoted from this position. The US’s Federal Reserve, the UK’s Bank of England’s Monetary Policy Committee, and the European Central Bank (ECB) all left rates unchanged in March.

What may have been in their thinking, is the fear that elevated energy prices could spark a return to that stickier higher-than-normal global inflation (last seen at the height of the 2022 cost of-living crisis when interest rates were commensurately elevated). However, our Fund Managers point out that the world was in a very different place back then – job markets and economies were accelerating as the world had finally cut free from the grasp of a worldwide pandemic. So, back then, it was a number of elements that contributed to 'sticky' inflation, rather than it just being an oil price shock.

New trade deals - a welcome distraction

Despite all the noise focused on the Middle East during the month, the European Union (EU) was pushing ahead and forging new paths of its own. Diversifying away from traditional trading partners (namely the US), on 24 March, the EU finalised a long-awaited free trade deal with Australia. This will see both sides eliminate tariffs on almost all goods and potentially make it easier for the EU to access Australia’s critical minerals (cutting the EU’s reliance on China).

This came quickly off the back of a landmark trade deal the EU made with India in January, which enables free trade of goods between the EU block of 27 states and India – a combined market of around two billion people.

Canada (a close neighbour of the US), also made a new trade deal in January. This time, it was China’s turn as the two nations agreed a deal at a high stakes meeting between President Jinping and Prime Minister Carney. Canada has agreed to reduce tax on Chinese electric vehicles, and China agreed to lower the levies on Canadian canola oil.

It is possible, over time, we could see other countries reducing their reliance on the US market.

Additional challenges for governments globally

Due to the fallout from the US-Israeli/Iran conflict, governments worldwide will be dealing with additional economic challenges on home soil. Many countries are feeling the 'pinch' at the pumps as the price of petrol and diesel skyrocketed.

Energy price hikes will also be unavoidable (although perhaps less of an issue for UK consumers right now as we enter the warmer months of the year). It’s been well publicised that the UK energy regulator, Ofgem, is reducing its energy price cap on 1 April (a saving of £117 off the average energy bill). However, the true impact of the energy crisis will only really be felt when the regulator releases its next energy price cap on 1 July.

The UK government had also baked in support initiatives (before the Middle East crisis began), such as increases to the state pension and the national living wage, along with the removal of the two-child limit on Universal Credit. However, none of this reflects an up-to-date picture, and Prime Minister Starmer is under pressure to address the latest energy crisis.

The key point here is any handouts for support packages in the UK will further damage already-stretched government finances. Any perceived lack of discipline will likely be frowned upon by government bond markets and could explain why, here in the UK, gilts fell particularly heavily in March.

Global interest rate anxiety is currently high which explains why bond markets generally have fallen and are not acting as a 'safe haven', as is traditionally the case. As long-term investors, we are certainly not downplaying the lasting impact on inflation of 'higher for longer' oil prices. But our Fund Managers do see good potential in corporate bonds and shorter-dated government bonds at 'now cheaper' prices.

Further volatility is expected, however, once President Trump provides clarity on his longer-term plans regarding the Strait of Hormuz, post the two weeks’ ceasefire.