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14th April 2026
Cappuccino Commentary
March 2026 Review
Over the past month, the escalation of the Middle East conflict has dominated global financial markets. On the last day of February, the US, in coordination with Israel, launched a series of airstrikes and military operations targeting Iranian government and military facilities, including the assassination of the Supreme Leader Ali Khamenei. Iran’s response was swift and included military retaliation across the region against Israel and several other Gulf states. As of the time of writing, there has not been a conclusive resolution to the conflict, and this has resulted in major disruptions to shipping through the Gulf and a sharp increase in energy prices.
Most asset classes were negatively impacted in March with the global equity markets bearing the brunt of volatility, although the selloff was relatively muted in comparison to moves experienced following Trump’s ‘Liberation Day’ tariff announcements a year ago. Global equity markets fell- 6.3% over the period although regional returns varied. Countries and regions that are more exposed to energy exports from the Gulf were more negatively impacted given the spike in oil prices. This was evident when looking at returns for regions including Japan (-10.4%), Asia (-6.9%) and Europe (-9.2%). Conversely, the US market fared somewhat better (-5.5%) given that the country is a net oil/gas exporter and benefitted from a rally in the US dollar. While recent performance has been disappointing, it is worth noting that global equity returns have been relatively muted so far this year with many regions like the UK, Japan and Emerging Markets still in positive territory.
Most bond indices finished the period lower. Government bond yields moved higher (resulting in bond prices finishing lower) as concerns that the recent surge in oil prices would feed into higher inflation. This was particularly notable to us in the UK where expectations shifted from Bank of England interest rate cuts (prior to the Iran conflict) to potential rate hikes. The UK’s reliance on imported energy may potentially amplify the inflationary impacts of higher energy prices and as a result, Gilts fell -3.8% over the month. The portfolios exposure to shorted dated, investment grade bonds also finished lower although the drawdowns were more muted.
Most alternative asset classes also struggled, except for oil which recorded its largest monthly gain on record. Precious metal saw a sharp reversal from record highs, and we saw some weakness across other asset classes such as infrastructure and property given the heightened geopolitical uncertainty.
Needless to say, the conflict in Iran has increased market uncertainty and remains a fluid situation. History suggests that markets often stabilise once the initial uncertainty begins to fade. This pattern was visible following the outbreak of the Russia-Ukraine war and during earlier conflicts such as the Iraq and Gulf wars. While initial reactions were often significant, markets typically recovered as the situation became clearer. From our perspective, it’s important to avoid making kneejerk decisions and instead focus on diversification to help weather any volatility.
Please note:
For regulated financial advisers and investment professionals only. Copia does not provide financial advice, and the contents of this document should not be taken as such. The value of investments can increase and decrease, past performance and historical data cannot guarantee future success, and any references to individual stocks or asset classes are made purely for illustrative purposes.
The performance of each asset class is represented by certain Exchange Traded Funds and Passive Funds available to UK investors and expressed in GBP terms selected by Copia Capital Management to represent that asset class, as reported at last UK market close before the end of the calendar month. Reference to a particular asset class does not represent a recommendation to seek exposure to that asset class. This information is included for comparison purposes for the period stated but is not an indicator of potential maximum loss for other periods or in the future.