Market Commentary

The global economy and investment markets took a step backwards in March as the United States and Israel’s joint offensive in Iran, along with Iran’s response, was digested. Share markets plummeted, oil prices skyrocketed, and interest rates rose, reflecting higher inflation expectations. Gold, meanwhile, pulled back as investors flocked to cash.

Trump’s early assurances that the conflict would be brief did not materialise. Iran entrenched its position, restricted access to the Strait of Hormuz, and launched retaliatory strikes on US targets across the region. The disruption of the Strait became a key economic lever, tightening global oil supply and pushing oil prices higher. The duration of both the conflict and the shipping bottleneck remained uncertain and will be central to longer-term outcomes.

Equity markets reacted negatively, with sentiment turning broadly bearish as the economic implications became clearer. Volatility spiked, and most sectors sold off, with energy the lone beneficiary.

New Zealand markets moved in line with global weakness, underscoring how closely our economy is connected to the rest of the world. Reserve Bank of New Zealand officials highlighted eroding purchasing power, noting that the Middle East conflict is likely to lift near-term inflation and soften growth. Recent data reinforced this outlook, with the December 2025 quarter GDP rising just 0.2%.

Australia faced similar pressures, with the Reserve Bank of Australia raising the cash rate another 0.25% to 4.10% as it continued to grapple with already persistent inflation. Labour data remains strong, and the Consumer Price Index is hot, printing 3.7% for the year.

Given this context, equity performance was dismal. The US S&P 500 and NASDAQ fell 5.09% and 4.75% respectively, while New Zealand’s NZX 50 dropped 6.73% and Australia’s ASX 200 declined 5.91%. The UK’s FTSE 100 was the weakest performer, down 7.79%.

The month would have looked even worse if not for a sharp rebound on 31 March, when the S&P 500 rose 2.91% on hopes the conflict might ease. Even so, uncertainty remains high, and the trajectory of the war in Iran will be a key driver in the months ahead, even if the economic fallout takes longer to unwind.