Written by Chris Ayton
Despite continued uncertainty driven by the challenging geopolitical backdrop, global equity markets only fell marginally over the past week with the MSCI All Country World Index down ‑0.8%. Concerns over whether an elevated oil price, and the associated impact on inflation, could limit the ability for central banks to cut interest rates in the coming months also held back global bonds with the Bloomberg Global Aggregate Index down -0.7% in GBP hedged terms. UK government bonds were particularly hard hit with the market having gone from predicting multiple interest rate cuts in the UK in coming months to now suggesting the next move by the Bank of England may even be up.
The impact of higher oil prices has undoubtedly been a driver of short-term price movements in many financial markets in recent weeks, including last week. Although our investment team get invited to dial into “expert” calls on the crisis on a seemingly hourly basis, we think it is impossible to predict the outcome of current geopolitical events. By adopting a diversified approach to investing, we find such moments, as concerning and horrendous as they are, typically have limited impact on longer-term client outcomes if you stay the course. It should also be noted that global equity indices remain in positive territory for the year-to-date, reflecting the benefits of global diversification.
Within equity markets, the UK equity market was one of the strongest performers last week, only falling -0.2%. This outperformance was entirely driven by larger companies, unsurprisingly led by large oil companies such as BP and Shell, as the more domestically focused FTSE 250 index of medium sized UK companies was down -1.9% as investors perceive mid-sized companies to be more impacted by potentially higher input prices and the prospect of interest rates staying higher for longer. The UK market also shrugged off the news that the UK economy failed to grow in January, which was below expectations of +0.2% growth and a snapshot taken even before the war in the Middle East and resultant spike in oil prices.
Japan’s stock market was one of the weakest last week, with the MSCI Japan Index falling -2.6%. Japan is heavily reliant upon imported energy, mostly from the Middle East, and so is more exposed when there are threats to global oil supply. Higher oil prices also increase operating costs for many manufacturers that are quite prevalent in Japanese equity indices.
Within Emerging Markets, we continued to observe large dispersion in underlying country returns. China’s stock market was relatively strong, with the MSCI China index rising +1.4% over the week. With a very different investor makeup, the Chinese equity market often dances to its own tune although the fact that China has made significant investments into renewable energy and strategic oil reserves over recent years has likely shielded it from some of the energy related fears observed elsewhere. This contrasted to India, which is a large oil importer, and the potential impact of an extended crisis helped push its market down -4.8% over the week, retaining its spot as one of the weakest performing Asian stock markets this year.
The week again highlighted the role of real assets as effective inflation-sensitive diversifiers as the Bloomberg Commodity Index rose a further +2.7%. This broad commodity index is now up +23.8% in 2026 in Sterling‑hedged terms. We much prefer this broad and diversified approach to commodities to an approach of trying to predict which individual commodity is likely to win next. While many were clamouring for gold exposure at the start of the year, most commentators thought the oil markets were in a state of oversupply. Who would have thought by just mid-March we would see a backdrop where the oil price has risen over 70%, more than four times the appreciation in gold prices in 2026 so far.
All performance figures are stated in Sterling terms, unless otherwise specified.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 16th March 2026
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