Investment markets reacted sharply to Donald Trump’s Iran ‘excursion’ in March, but over the quarter there was not as much change as the headlines might have made you believe.
| Index | Change
31/12–27/2 |
Change
27/2–31/3 |
Change
Q1 2026 |
| FTSE 100 | 9.9% | -6.7% | 2.5% |
| Standard & Poor’s 500 | 0.5% | -5.1% | -4.6% |
| Nikkei 225 | 16.9% | -9.6% | 5.7% |
| Euro Stoxx 50 (€) | 5.9% | -9.3% | -3.9% |
| Shanghai Composite | 4.9% | -6.5% | -1.9% |
| MSCI Emerging Markets (£) | 14.7% | -11.6% | 1.5% |
| MSCI AC World (£) | 6.6% | -5.6% | 0.6% |
2025 was generally a good year for investment markets with the UK putting in a notably good performance – the FTSE 100 was up more than a fifth over the year, beating both Europe and the US in local currency terms. 2026 started off in a similar pattern, with expectations that interest rates would continue to drift down in many countries and that inflation, if not dead, was unlikely to be a great concern. By Friday 27 February, as the table above shows, most markets had risen above their closing levels in 2025. Japan was the standout performer, thanks to the snap election success of their new Prime Minister, Sanae Takaichi.
Then, on 28 February, the US-Israel war with Iran started.
For several months, the US had been building what Donald Trump labelled ‘an armada’ in the seas around Iran, action which prompted a rise in the oil price to a little over $70 a barrel. However, the timing of the attack was a surprise, which deeply unsettled investment markets, as was evident when trading resumed on Monday 2 March. The remainder of the month was a largely downward path, interrupted by brief rallies when it appeared that a decisive change of mind by Trump might prevail. By the end of March and the first quarter, with oil over $100 a barrel, a clean resolution looked unlikely.
Stand back a little and look at investment markets’ performance across the quarter and the picture is not quite as you might imagine:
- While equity markets fell in March, the falls were mostly matched by the increases in January and February. If you are one of those people who only look at quarterly valuations, you might not even register the ‘exciting’ three months that have passed.
- Gold, the classic safe haven, investment, proved anything but. Its dollar price fell by 10.3% in March, although over the quarter it gained 7.7%.
- Arguably, the rise in oil prices had the greatest effect on government bond markets, as bond investors loathe inflation. The UK gilts market was among the hardest hit, which bodes ill for a government that plans to borrow over £250 billion in 2026/27.
The first quarter of 2026 has provided plenty of noise – and a reminder that the short-term cacophony can be just a little deafening.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
