Executive Summary 

  • The Iran war has become the dominant global macro driver, triggering the largest oil supply shock in decades.
    • Oil prices have been volatile, spiking sharply before falling on ceasefire hopes — butremaining structurally elevated.
    • Central banks now face a more complex backdrop, balancing falling inflation with renewed energy-driven price pressures.
    • Global equities are increasingly volatile, with continued rotation away from the U.S. toward better-value regions.
    • Gold and commodities have strengthened further, reinforcing their role as portfolio diversifiers. 

 

Iran War: Oil Shock Driving the Global Economy 

The conflict involving Iran continues to be the defining macroeconomic event of 2026, with April dominated by its impact on global energy markets. 

At the height of the disruption, the effective closure of the Strait of Hormuz — through which around 20% of global oil supply normally flows — triggered what is now widely considered the largest oil supply shock in modern history.  

Global supply fell dramatically, with more than 10 million barrels per day removed from the market, while refinery activity and shipping routes were heavily disrupted.  

Oil prices responded accordingly: 

  • Prices surged sharply through March, with physical markets regularly trading at over $100 per barrel. This compares to $70 per barrel on February 27th.  
  • Short-term spikes continued into April, with Brent crude rising above $110 per barrel amid renewed attacks on infrastructure.  
  • However, prices also experienced sharp falls following a temporary ceasefire, highlighting extreme volatility.  

This volatility reflects a market attempting to price not just supply, but uncertainty around how long disruptions will last. 

Crucially, the impact is now feeding through into the broader global economy: 

  • Inflation risk has re-emerged: Higher energy costs are beginning to filter through supply chains, increasing transport, manufacturing and food prices.  
  • Demand destruction is underway: Higher prices and shortages have already reduced global oil demand, particularly in Asia.  
  • Global growth is under pressure: Energy-importing economies are facing rising costs, forcing governments to intervene and increasing fiscal strain.  

Even if the conflict de-escalates, the oil market is unlikely to return quickly to pre-war conditions. Supply chains, shipping routes, and risk premia have all shifted, suggesting a structurally higher energy price environment in the near term. 

For investors, this represents a classic late-cycle shock: inflation risk returns just as growth is already slowing. 

 

Global Equities Context 

Global equity markets were significantly more volatile in April. Sharp sell-offs driven by oil price spikes were followed by equally sharp recoveries on ceasefire developments, leaving many indices broadly range-bound. 

In the U.S., weakness in large technology stocks has continued, with investors becoming increasingly sensitive to valuations and earnings expectations. Rising energy costs also raise concerns about margins, particularly in consumer and industrial sectors. 

Outside the U.S., the rotation into more attractively valued regions continued. UK and European equities remained relatively resilient, supported by energy and commodity exposure, while Japan and India continued to attract structural inflows. 

Markets remain heavily influenced by macro developments, particularly energy prices and central bank expectations, rather than underlying earnings growth. 

 

Central Banks: From Disinflation to Uncertainty 

The path for central banks has become more complicated. 

In the United States, the Federal Reserve continues to acknowledge progress on inflation but now faces renewed uncertainty. Markets have begun to push back expectations for rate cuts slightly, reflecting concerns that inflation may prove stickier than previously expected. 

In the UK, the Bank of England held the base rate at 3.75%, maintaining its cautious stance. While domestic inflation pressures have eased, the global energy shock presents a clear upside risk. 

Central banks are now balancing two competing forces: 

  • Weak growth and softening labour markets  
  • Rising external inflation pressures from energy  

This tension is likely to define policy decisions over the coming months. 

 

UK: External Pressures Offset Weak Growth 

The UK economy continues to show weak underlying momentum. Consumer spending remains subdued, and business investment is constrained by uncertainty. The labour market continues to soften gradually. 

However, the external environment has become the dominant driver. Rising energy prices are likely to feed directly into household costs and business input prices, potentially slowing the pace of disinflation. 

Despite this, UK equities continue to perform relatively well. The FTSE 100’s heavy weighting toward global energy, mining and financial companies means it benefits from higher commodity prices and global economic activity rather than domestic conditions. 

Combined with relatively low valuations compared to U.S. equities, this continues to support the case for UK market outperformance. 

 

Other Viewpoints 

Cash 

Cash returns remain relatively attractive, but the outlook is increasingly uncertain. If energy-driven inflation persists, rate cuts may be delayed, extending higher yields for longer than previously expected. 

Fixed Interest 

Bond markets experienced renewed volatility during April. Rising oil prices pushed yields higher as inflation expectations increased, although longer-term expectations for easing remain intact. 

Fixed income continues to offer income and diversification, but with greater short-term uncertainty. 

Alternatives 

Gold strengthened further, supported by geopolitical risk and inflation concerns. Commodities — particularly energy — were the standout performers during the month. 

Real assets continue to play a crucial role in protecting portfolios against inflation shocks and geopolitical uncertainty. 

 

Regional Equity Overview 

UK Shares 

UK equities remained resilient, supported by strong performance in energy and commodity-linked sectors. The FTSE 100 continues to benefit from global exposure and attractive valuations. 

US Shares 

U.S. equities continue to lag global peers. Market leadership remains narrow, and the recent weakness in large technology stocks highlights the vulnerability of indices to sentiment shifts. 

With valuations still elevated and macro risks increasing, the case for heavy U.S. concentration remains less compelling. 

European Shares 

European equities have held up relatively well, supported by valuations and global exposure, although the region remains vulnerable to energy price shocks. 

Asian Shares 

Asian markets have faced greater pressure due to their reliance on imported energy. Governments across the region have begun implementing measures to offset rising costs, but this is placing strain on public finances.  

Japan and India continue to show resilience, supported by structural factors. 

Emerging Markets 

Emerging markets delivered mixed performance. Commodity exporters benefited from higher prices, while energy importers faced significant headwinds. 

 

Highlights & Risks 

Highlights 

  • Energy and commodity exposure providedstrong support to portfolios.
    •    UK, European and Asian equities continue to offer better relative value than the U.S.
    •  Gold and real assets performed strongly amid rising geopolitical risk.
    •      Diversification continues to prove effective during periods of volatility. 

Risks 

  • Prolonged disruption in the Strait of Hormuz could sustain elevated inflation.
    •  Central banks may delay rate cuts in response to rising energy prices.
    •  U.S. equity valuations and concentration risk remain elevated.
    •  Further geopolitical escalation could drive additional market volatility