March monthly market update - Reflections on February 2026

Markets were rattled after US strikes on Iran pushed oil prices higher, raising concerns about inflation and global economic growth.

What does the US–Iran conflict mean for markets?

Global stock markets came under pressure, while oil and wholesale gas prices surged after US military strikes on Iran. Markets were shaken by concerns the conflict could disrupt energy supplies and push inflation higher. The price of oil rose to over $100 a barrel for the first time in years, raising fears that higher energy costs could plunge the global economy into recession. Qatar has warned that oil could hit $150 a barrel if the war continues.

If the conflict drags on and the Strait of Hormuz remains blocked, higher oil and gas prices could feed inflation, leading to higher interest rates and weaker growth. Households are already feeling the squeeze, and persistently high inflation could curb spending further, which is a key driver of economic growth in developed economies such as the US and UK.

Central banks such as the US Federal Reserve and the Bank of England might have to keep rates on hold for longer or even raise them. Broader risks from prolonged disruptions include a new wave of supply-chain problems that could dampen global growth.

Economists believe much of the impact on the global economy will depend on the length and severity of the conflict. If energy disruptions are brief, higher fuel prices may lift inflation for only a month or two. However, if oil prices remain above $100 a barrel and inflation rises further, central banks could find themselves forced to raise rates again.

It is important to remember that while geopolitical shocks can trigger short-term volatility, history shows markets tend to recover over time. Whatever the disruption, markets have consistently rebounded from periods of turbulence and gone on to reach higher levels.

Has Trump really defeated inflation as he keeps claiming?

President Donald Trump has repeatedly claimed that inflation has been defeated and consumer prices brought under control over the past year, so recent softer inflation figures were welcomed by the White House. US inflation moderated to 2.4% in January, down from 2.6% the previous month.However, while the figures suggest improvement on the surface, the broader economic picture is less encouraging.

Trump’s assertion that inflation has been beaten is at odds with the experience of many Americans. Inflation remains above the US Federal Reserve’s (Fed) target of 2%, and while price growth has slowed, households are still feeling the strain. Costs for everyday items such as utilities and groceries have continued to rise, forcing some households to borrow to cover bills.

Beef prices have risen by around 15% since Trump returned to office, while ground coffee prices are up 29%. More importantly, some economists say Trump’s policies are keeping prices higher than they might otherwise be. Companies are still passing on costs from last year’s tariff increases to customers.

The outlook for inflation has also deteriorated in recent weeks. The conflict has disrupted global oil flows, sending US petrol prices higher and undermining Trump’s claims about tackling the cost-of-living crisis. Average petrol prices have surged past $3 a gallon for the first time since November, setting up a key test of Trump’s public approval.

Economists are also concerned that although US inflation is moderating, tariff uncertainty could keep inflation sticky. Fed officials have linked much of the overshoot of their 2% target to tariffs, although most now expect the tariff impact to fade this year.

Is slower consumer spending a worry for the US economy?

Americans may finally be feeling the strain of rising debt and slowing wage growth, with consumer activity slowing again in January after severe winter weather dampened spending. Retail sales dipped in January after stalling the previous month, raising concerns that consumption in the world’s largest economy is weakening.

The value of retail purchases fell 0.2% in January after being flat in December. In the fourth quarter, US wages grew at their weakest pace in more than four years. Meanwhile, total household debt climbed by $191 billion (1.0%) in the final three months of last year, bringing the overall balance to $18.8 trillion.

US consumer confidence has fallen to its lowest level in more than a decade as inflation pressures, pessimism about the economy and job concerns weigh on sentiment. As a result, Americans are cutting back on spending plans for holidays and other big-ticket purchases.

The slowdown in retail spending at the start of the year has also been accompanied by concerns about the labour market and the cost of living. Employers unexpectedly cut 92,000 jobs in February, while unemployment rose slightly to 4.4%.

Last year was relatively robust for consumer spending despite elevated interest rates and high inflation. While the recent pullback raises questions about a broader slowdown, the data does not necessarily point to a sustained downturn. Although severe weather weighed on January sales, economists believe momentum should recover in the coming months.

Looking ahead

China has set a growth target of between 4.5% and 5% this year, the lowest since 1991, as it grapples with domestic headwinds and growing uncertainty abroad. This compares with growth of 5% last year and targets of around 5% over the previous three years.

The outlook for UK economic growth remains subdued. The Bank of England said it now expects the economy to have grown by 1.4% last year, down slightly from its previous forecast of 1.5%. The central bank also cut its growth forecasts for 2026 from 1.2% to 0.9% and for 2027 from 1.6% to 1.5%.Amid rising unemployment and stretched household budgets, UK consumer confidence has fallen. Economists have warned that weaker sentiment could act as a drag on growth if households pull back on spending.