Reflections of the CIO March 2026

March was another month full of drama and volatility, with the strong performance of January and February reversing sharply in March, as the impact of the war in Iran made itself felt across global markets.[1]

Although the geopolitics and news flow accompanying the war are fiendishly complex to navigate and forecast, from the market’s perspective the events were very straightforward to interpret. A huge spike in the price of oil (c. +50%)[2] was caused by Iran’s effective closure of the Strait of Hormuz, an action which deprived the global oil market of about 20% of its daily supply in an instant.[3]

The longer this supply remains disrupted, the higher the oil price will stay, acting as a tax on global growth and providing a boost to global inflation. Higher inflation in turn usually requires higher interest rates to control it, that or a slowdown in end final demand. Neither outcome is a good one for stock or bond markets, explaining why both fell in tandem during March as they factored in a deteriorating outlook.[4] There was some discrimination, with those countries importing oil falling the most whilst those exporting oil remaining relatively resilient, but the overall picture was one of retreat. Outside of oil and gas prices, nearly every other asset fell during the month, handing back all or most of the gains made in the year to date.

How we proceed from here depends crucially on the duration of high oil prices and the reaction of central banks as they adjust their policies (or not) to deal with the consequences of that price spike. However this ends up playing out, we do at least start from a position of relative strength in the global economy and much less of an inflation issue than in previous years. That at least gives us a ‘buffer’ of sorts to deal with the next few months of uncertainty.

We should also remember that when thinking about long term outlooks from here that the period before the war was also choc a bloc with its own dramas and reversals too. Perhaps the most important issue to keep in mind alongside the impact of the Iran war is the impact of new artificial intelligence (AI) related products and services. The potential threats and opportunities from this new technology have already caused violent price movements impacted stocks and sectors, and we think that they will continue to do so in the months ahead.

Forming an outlook in this environment starts with a healthy dose of humility, as probability weighting any particular scenario is fraught with difficulty. Such is the nature of the ‘fog of war’, but we do, unfortunately, have plenty of precedents and looking at those helps us shape the likely path from here. History suggests that, eventually, the supply shock passes and passes fairly quickly.

The reasons revolve around the physical constraints on the combatants – constraints from munitions or from achievement of military objectives – and from the constraints placed upon the combatants by the rest of the world, as the pain of higher oil prices is felt globally. The costs quickly start to outweigh the benefits for all parties, leading to a settlement process. As we write, the oil market expects a high, volatile price for at least another month before falling steadily over the next year. The stock market drawdowns so far are also small enough to imply agreement with this relatively optimistic scenario as a central case. As mentioned earlier, the global economy is also currently believed to be strong enough to absorb the negative effects of the oil price rise, without spiralling off into recession.[5] There is also still plenty of historical government fiscal stimulus in the economic pipeline, helping to prop up demand and mitigate the worst of the war effects.

Taking all of these influences together, we can see why the consensus outcome from the Iran war is, ultimately, manageable. However, there are so many cross currents that it is difficult to be sure of any scenario. Portfolio wise, we had already been positioning in advance for a year in which returns would be harder to come by when compared to the previous few years. The appropriate risks were being taken for each risk profile, but we were also consistently broadening our portfolio diversification as far as we could. The diversification benefit is the single best protection we feel during tougher times. It is also the means through which opportunities for the longer term are captured and there are more and more of these being presented as valuations become more attractive across the board. Long term opportunity has always been the flip side of shorter term threats, and we believe the most likely scenario as we write is that the current war related turbulence will eventually pass and most likely turn out to be manageable.