Markets Unwrapped: March 2026
March proved to be a challenging and volatile month for global financial markets as geopolitical tensions, inflation concerns, and shifting interest rate expectations combined to unsettle investor confidence. While economic fundamentals in many regions remain broadly intact, the escalation of conflict in the Middle East dominated sentiment and drove sharp repricing across several asset classes.
In the United States, equity markets came under pressure as disruptions to global energy supply triggered a surge in oil prices, heightening inflation risks and reducing confidence that interest rates will fall in the near term. Growth-oriented and interest rate–sensitive sectors, particularly larger technology, were meaningfully impacted as markets reassessed valuation support amid higher borrowing costs. Energy stocks, however, were a notable exception, benefiting from stronger margins and improved short-term earnings outlooks amid restricted global supply. Monetary policy uncertainty also intensified during March. While U.S. interest rates were held steady, markets increasingly priced in the risk that elevated inflation, partly driven by energy prices, could delay or even reverse expectations of future rate cuts later in 2026. This uncertainty was further compounded by upcoming changes in Federal Reserve leadership and renewed concerns around U.S. fiscal and political risk, all contributing to ongoing market volatility.
European markets experienced a similar pattern. After beginning the year strongly and reaching record highs in February, equities reversed course as higher fuel and input costs placed pressure on both businesses and consumers. Europe’s reliance on imported energy left the region particularly exposed, leading investors to price in additional interest rate hikes across 2026. While the near-term environment remains challenging, European equities continue to trade at relatively attractive valuations compared to global peers, which may present opportunities once confidence stabilises. Across Asia and emerging markets, risk sentiment deteriorated as higher energy prices and trade disruptions weighed on growth expectations. China announced further fiscal support measures aimed at stabilising economic activity, while structural adjustments in property and manufacturing sectors continue to evolve. Despite short-term volatility, select emerging markets, particularly those linked to semiconductor and AI-related supply chains, continue to dominate key supply chains.
Australian equities initially benefited from strength in resource stocks but gave back gains as inflationary concerns re-emerged with the conflict in Iran. The Reserve Bank of Australia lifted the cash rate further during February and March as inflation remained stubbornly high, with markets now expecting additional rate increases later in the year. Higher rates supported bank earnings resilience, while energy stocks again stood out as beneficiaries. More interest rate–sensitive sectors, including technology and growth equities, remained under pressure.
Looking ahead, market volatility is likely to persist as investors balance geopolitical developments, central bank policy direction, and corporate earnings outlooks. This volatility is anticipated to remain until key geopolitical events come to some form of a resolution.
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