Investor intelligence – 10 April 2026

The catalyst came on 28 February, when coordinated strikes by the United States and Israel on Iran marked a sharp escalation in geopolitical tensions. Market sentiment deteriorated rapidly, as Iran responded through attacks on US-linked interests and key energy infrastructure across the Gulf. The conflict quickly evolved into a global market shock, shifting investor attention to the Strait of Hormuz, a critical artery for oil, gas and industrial inputs. Around 20% of the world’s crude oil and a third of global chemical and fertiliser trade moves through this strait. Shipping traffic fell sharply during March, disrupting trade flows and intensifying uncertainty across global markets.

Some of the oil supply disruption was absorbed through releases from strategic petroleum reserves and alternative transport routes. These measures provided partial relief, but they fell well short of offsetting the impact, keeping pressure firmly on global energy markets.

Brent crude futures jumped by 63.3% during the month. Fertiliser and chemical markets were also disrupted, increasing concerns about second round inflation effects beyond energy. The Middle East granular spot price for urea surged by 65.8% in March, reaching a record high by month end. This reinforced concerns that the supply shock would be both inflationary and damaging for growth.

Bond markets adjusted swiftly, pushing bond yields materially higher during March, as investors priced an extended period of policy restraint. Equity markets struggled under the combined weight of higher discount rates and deteriorating earnings expectations.

In March, the widely-watched Morgan Stanley Capital International (MSCI) World Index fell by 17.5% and declined by 3.9% over the March quarter, marking a turbulent and disappointing start to the year for global share markets. The sell off intensified as energy prices surged. Rising cost pressures and softer demand expectations weighed heavily on corporate margins and investor confidence.

Energy import-dependent economies bore the brunt of the sell off. Japan experienced one of its poorest months in years as higher energy costs and weaker global growth expectations weighed on sentiment. The Nikkei fell by 13.2% during March. Other Asian equity markets also weakened materially, reflecting pressure from rising oil prices and disrupted trade flows. Indian equities declined by 11.2% over the month.

US equities proved more resilient than most peers. Strong domestic energy production and substantial gas reserves softened the economic impact relative to other developed markets. Even so, higher bond yields and fading growth momentum weighed on performance. The S&P 500 declined by 5.1% in March, a smaller fall than many global counterparts.

Despite Australia being a large net energy exporter, export exposure remains concentrated in coal and LNG, while most domestic oil consumption depends on imported supply. This structural exposure leaves the economy vulnerable to global fuel disruptions.

The S&P / ASX 300 index reached a record high on 2 March before reversing course, falling 7.3% over the month. This was the weakest monthly outcome since June 2022. Returns were also negative over the March quarter, declining by 2.0%.

Market weakness was broad based. Only three of the eleven sectors recorded gains during March.

Energy led the market, rising 19.2%, marking its strongest monthly advance since November 2020, as higher oil prices lifted earnings expectations. Viva Energy, Yancoal Australia and Karoon Energy were the leading contributors. Energy also remained the strongest performing sector over the year to the end of March, delivering a gain of 51.1%. Utilities and consumer staples also ended the month higher, reflecting investor preference for defensive exposures.

At the other end of the market, materials and information technology recorded the largest declines in March, falling 13.2% and 12.9%, respectively. The resources sector fell by an average of 8.2%, as sentiment weakened. This pullback occurred despite firmer iron ore prices, as concerns about reduced demand from a cyclically challenged China weighed on outlooks. Gold mining stocks also came under pressure following a 12.1% decline in the gold price, eroding earnings expectations across the sector. Meanwhile, technology stocks remained under sustained pressure, as fragile confidence and elevated valuations continued to weigh on the sector.

Real estate also recorded a double-digit negative return over March, highlighting persistent headwinds facing interest-sensitive segments.

Smaller companies underperformed the broader market. The S&P small ordinaries index fell 11.0% over March, as investor appetites for risk deteriorated. Smaller companies tend to be more exposed to slowing activity and tighter financing conditions, contributing to heavier selling during periods of market stress.

Australian fixed interest fell by 1.4% over March while global fixed interest declined by 1.9%. Higher energy prices fed directly into inflation expectations while simultaneously weighing on growth prospects. Investors focused primarily on the inflationary implications rather than seeking safety in government bonds, reversing the typical flight to quality response seen during periods of heightened uncertainty.

Markets now anticipate that most major central banks will halt easing cycles and move policy rates higher over coming months. The primary exception remains the US Federal Reserve, where markets continue to expect eventual rate cuts.

The sell off in bonds occurred alongside sharp equity market declines, placing traditional diversification strategies under strain. Rising government bond yields undermined the defensive role typically played by the conventional 60-40 portfolio.

Bond yields rose sharply across all major markets during March. Ten-year yields increased by 35 basis points (bp) in the US, 36bp in Germany, 24bp in Japan, 35bp in Canada and 68bp in the UK. The rise in yields reflected a reassessment of inflation risks alongside growing concern about the fiscal response to the crisis. Slower growth threatens government revenues at the same time as spending pressures rise through unemployment support, energy relief and defence commitments. The combination points to wider budget deficits, increased issuance and sustained upward pressure on longer dated yields.

In Australia, 10-year government bond yields lifted by 32bp. Shorter-dated yields in Australia rose more sharply, leading to a flattening of the yield curve. The 2-year government bond yield increased by 48bp last month, as markets priced in the likelihood of additional interest rate rises.

Currency moves were comparatively contained during March, but they still reflected a shift in risk sentiment. The Australian dollar weakened by 3.1% against the US dollar over the month, falling from 0.7132 to 0.6904. Periods of elevated market volatility typically place downward pressure on the local currency and March followed this pattern. Several Asian currencies also came under strain, including the Japanese yen, where authorities signalled a readiness to intervene if movements became disorderly. By contrast, the US dollar strengthened during the month, supported by safe-haven demand and the US position as a major net energy exporter. The US dollar index recorded its highest daily close in almost a year near the end of March, reaching 100.51.

The combination of higher yields and volatility spurred downward pressure on valuation sensitive real-estate assets.

Australia’s listed property declined sharply, recording a negative return of 11.2% over the month in unhedged Australian dollar terms. Global listed property also fell, although to a lesser extent, declining by 5.6%. Infrastructure proved more resilient, posting a decline of only 0.1% during March.

Shifts in interest rate expectations played a central role in the sector’s underperformance. As the Australian 10-year government bond yield moved above 5%, the yield spread between listed property and government bonds narrowed materially. The Australian 10-year yield closed above 5% on 16 March 2026 for the first time since July 2011. Investors consequently demanded a higher risk premium to hold listed property.

This market adjustment occurred despite resilient fundamentals reported during the February 2026 half‑year reporting season. On average, A‑REIT earnings modestly exceeded market expectations and most listed property trusts either maintained or upgraded full‑year guidance. These positive operational outcomes were, however, overshadowed in March by a deteriorating macroeconomic backdrop and growing expectations that borrowing costs will remain elevated.

Goodman Group is the largest constituent of the Australian listed property sector. Its exposure to data centres also weighed on sentiment, as investors continued reassess AI-related capital spending. The stock fell by 12.2% in March and has now declined by 18.8% over the past year.

Infrastructure assets held up comparatively better. Perceived as less cyclical and supported by long duration contracted cash flows, global listed infrastructure declined by just 0.1% during March. Over longer periods, global listed infrastructure continued to deliver solid returns. The average return over the past three years has been 11.4%. Structural demand for renewable energy, power networks and digital infrastructure has provided ongoing support, helping the asset class navigate periods of market volatility more effectively than property.

New alignments are emerging and geopolitical risk is rising, prompting countries to place greater emphasis on domestic security, energy supply, technology capability and strategic autonomy. This transition is altering trade patterns and capital allocation and is perhaps increasing the likelihood of periodic shocks that transmit quickly through commodity, currency and financial markets.

This fragmentation coincides alongside a structural change in the inflation backdrop. The disinflationary forces that dominated the global economy before the pandemic are no longer dominant, as supply constraints, higher defence spending and risks of recurring energy disruptions add persistence to price pressures. It means inflation may settle at a higher rate than investors became accustomed to over the decade prior to the pandemic.

AI may in time provide an offset to some or all of these cost pressures through productivity gains, although the scale and timing remain highly uncertain. Regardless of the outcome, investors need to place greater weight on inflation than they did prior to the pandemic era and place a premium on building resilience in portfolios. This argues for greater selectivity across asset classes and a stronger focus on real return outcomes (that is, outcomes adjusted for inflation), liquidity and balance sheet strength.

In Australia, the domestic outlook has become more challenging as global shocks intersect alongside already elevated inflation pressures. The Reserve Bank (RBA) had already shifted decisively toward tighter policy settings in February with a rate hike and followed that up with another rate hike in March. Our core view centres on two further rate increases, one in the current quarter and another in the third quarter.

Further tightening, combined alongside higher fuel costs that act as an effective tax on households, is expected to slow economic activity materially and help ease inflation, although core inflation is now expected to take longer to return to the target band. We expect core inflation to breach 4.0% mid-year, before slowing. Headline inflation will rise further, although the cut in the fuel excise discount in the near term will help limit the extent of the rise. We have revised our economic growth forecast lower. We now expect GDP growth to ease to 1.4% this year, down from 2.6% in the year ended 2025, and we expect the unemployment rate to rise from 4.3% currently to 4.7% by year’s end. These forecasts are subject to greater variability than usual, as the outcomes for GDP, unemployment and inflation will depend heavily on how long the conflict in the Middle East lasts.

The duration of the current conflict remains a key source of uncertainty. Any further stimulus to help consumers and businesses through this period is also unknown but likely to be revealed in the Federal Budget handed down in May.

The two-week ceasefire announced on 8 April is encouraging if it holds and progresses toward de-escalation. Even under a calmer security backdrop, supply disruptions are likely to persist. Repairs to refineries and related infrastructure will take time and some facilities may take years to rebuild. As a result, global oil supply is likely to remain tighter than would otherwise have been the case, leaving inflation risks skewed to the upside even as growth momentum softens.

Market behaviour continues to reflect this uneasy mix of inflation anxiety and growth concern. Shares in energy have again attracted capital as oil prices rise and policy risk increases, while defensive sectors have also drawn support as investors seek earnings stability. However, perceived defensiveness does not eliminate exposure to the conflict.

The chart below places the current market episode in historical context by rebasing the S&P / ASX 200 index to 100 at the start of each major shock since the early 1980s and showing daily movements over the following two years. So far, the market has tracked most closely the experience of the Iran Iraq war, marked by a sharp initial decline followed by an extended period of volatility.

Markets remain highly sensitive to headline risk in this environment. Asset prices are reacting rapidly to incremental developments and headline news, sometimes delivered with limited clarity. Such conditions can provoke short-term dislocation and obscure underlying fundamentals. Maintaining discipline in this environment remains critical. Anchoring decisions to valuation, economic fundamentals and long-term objectives can reduce the risk of reactive positioning during periods of elevated volatility and noise.