Market insights,
March 2026
Investing
5 min read
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Please note: All performance numbers referenced in this article are sourced via Morningstar, and are in local currency terms, unless stated otherwise.
Last month’s escalation of war against Iran sent immediate shockwaves across financial markets, with longer-lasting effects likely to be felt within the global economy for months to come.
Despite campaigning on a ticket of no foreign wars[1], Trump’s second term in office has so far seen two US-led attacks on Iran. He also approved the extradition and imprisonment of former Venezuelan President, Nicholas Maduro.
War contagion sparks inflation risk
In retaliation to being attacked, the Iranian military fired ballistic missiles and drones at the energy infrastructure of neighbouring countries including the UAE, Bahrain, Qatar, and Saudi Arabia.
Iran also moved quickly to close the Strait of Hormuz – a busy shipping lane believed to underpin the distribution of circa 20% of the world’s supply of oil[2]. Before the conflict, an estimated 20 million barrels per day flowed through the straight[3].
The Iranian strategy to choke off a key global supply route, and to target energy production and storage across the region, caused the price of ‘liquid gold’ to soar above the $100 (USD) a barrel mark[4] – often considered the informal threshold for recession risk.
Given that higher oil prices can lead to higher inflation, the prospect of rising interest rates (as a counter measure), creates a renewed global economic headwind in 2026.
As the crisis unfolded, the NZ Reserve Bank Governor, Dr Anna Breman, went on record to acknowledge both the scale of the problem, as well as the tightrope that the MPC will need to walk in the months ahead: “We are likely to see higher headline inflation over the near term, and somewhat weaker growth momentum… Getting this (monetary policy) judgement right is key to avoiding reacting too early to near-term inflation pressures that monetary policy can do little about – or reacting too late if above-target inflation becomes embedded in the economy[5].”
Few hiding places
The immediate fallout from the war was wide-reaching, with equity markets experiencing sharp selloffs in March, both at home and abroad.
The MSCI World Index finished down -1.5% for the month and is down -2.8% year-to-date (ytd) in NZD terms[6].
A similar story played out across the S&P 500 (-0.1% in March), the FTSE 100 (-3.2% in March)[7], the Euro Stoxx 50 (-9.3% in March in EUR)[8] and the NZX 50 (-5.8% in March with imputation TR NZD)[9].
In one of the biggest reversals of fortune since the start of 2026, the ‘Magnificent-7’ basket of stocks has had a particularly torrid start to the year. By the end of March, the Mag-7 was collectively down -5.6% for the month and is down -12.1% ytd (at the time of publishing and in USD terms)[10]. So far this year, the highly concentrated nature of the tech-heavy S&P 500 index has come back to bite investors.
Gold also suffered
Typically, the inverse correlation between stock and bond markets would see the latter benefit in the face of stock market turmoil. In March, however, this didn’t happen – bond markets also sold off as investors started to anticipate higher interest rates in the not-too-distant future.
The yield on US 10-year government debt – considered the global benchmark – ended March at 4.2%[11].
In another development that some readers of our articles may find counter-intuitive, the price of gold also fell across March. Instead of strengthening in the face of stock market strain, the combined sell-off in equity and bond markets saw a number of investors exiting their positions in the precious metal in an effort to raise funds. The move shredded gold’s reputation as a safe-haven asset.
By the end of March, the price per troy ounce sat at USD $4,325.4, down from the high of USD $5,344.3 seen on 29 January 2026[12].
What’s the significance for investors?
For investors, there is no denying that March was painful.
The global economy is seemingly once again exposed to the whim of Donald Trump and his administration. Widespread short-term distress across financial markets left few places to hide.
Going forwards, we would still expect the inverse relationship between stocks and bonds to hold true. Diversification remains an investor’s key tool when it comes to long-term risk and reward.
Unfortunately, the unpredictability of White House foreign policy also makes it very hard to forecast where all of this might be heading. On the one hand, Trump talks about giving Iran time to negotiate a ceasefire agreement. While on the other, he has ordered more troops to be sent to the Middle East, in a move which raises the prospect of a land invasion.
From both a human and an investor perspective, the hope is that this latest conflict is short-lived. There appear to be few winners from any scenario involving a long-lasting war.
The fact that US mid-term elections are only 8 months away may provide US political power brokers with a physiological ‘off ramp’. Trump’s popularity amongst American voters has fallen sharply since the start of the Iran war, which must surely be playing on his mind[13].
In the scenario of quick de-escalation (i.e. a ceasefire and the re-opening of the Strait of Hormuz), it would be logical to anticipate a quick bounce back across equity and bond markets.
On the flip side, a longer-term war that leads to constrained oil supply and higher interest rates, would suppress both investor sentiment and global economic growth prospects.
In the short term, it would be prudent to expect volatile oil prices for as long as the outcome of the war remains unclear.
For now, however, our Portfolio Managers don’t see the need to make tactical or strategic asset allocation changes to portfolios as a result of this war. As ever, we are closely monitoring events and will keep you updated if anything changes.
For our clients, the next update to look out for will be the Q1 2026 fund manager commentaries, due out in mid-April. They will summarise the portfolio positions and any key changes that we’ve made since the start of 2026.
Sources and references
[1] Source: https://www.nbcnews.com/politics/donald-trump/trump-campaign-endless-wars-iran-no-end-date-rcna261323
[2] Source: https://www.bloomberg.com/graphics/2026-iran-war-hormuz-closure-oil-shock/
[3] Source: https://www.iea.org/topics/the-middle-east-and-global-energy-markets
[4] Source: https://markets.ft.com/data/commodities/tearsheet/charts?c=Brent+Crude+Oil
[6] Source: https://www.msci.com/indexes/index/990100
[7] Source: https://www.londonstockexchange.com/indices/ftse-100
[8] Source: https://www.cnbc.com/quotes/.STOXX50E?qsearchterm=Euro%20Stoxx
[9] Source: https://www.spglobal.com/spdji/en/indices/equity/sp-nzx-50-index/#overview
[10] Source: https://www.cnbc.com/quotes/.MAG7
[11] Source: https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
[12] Source: https://goldprice.org/gold-price-history.html
[13] Source: https://www.bbc.com/news/articles/c3w384px52no
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