Executive Summary

Global financial markets experienced a sharp reversal during March 2026 as the widening conflict involving Iran, Israel and the United States disrupted energy markets and revived fears of stagflation. A severe reduction in shipping through the Strait of Hormuz pushed oil and gas prices sharply higher, forcing investors to reconsider the benign inflation and interest-rate outlook that had supported markets earlier in the year.

US equities recorded their weakest month since 2022. The S&P 500 declined approximately 5.0%, the Nasdaq Composite fell 4.7% and the Russell 2000 lost around 5.0%. Energy was the only major S&P 500 sector to advance as sharply higher crude prices benefited producers, refiners and energy-service companies.

International markets generally suffered even greater losses. European equities fell sharply because of the region's dependence upon imported energy, while Japanese and other Asia-Pacific markets were heavily affected by higher oil prices, weaker currencies and concerns about manufacturing costs. The MSCI Emerging Markets Index declined approximately 13%, its worst month since March 2020.

The Federal Reserve maintained its federal funds target range at 3.50%-3.75%. Policymakers acknowledged that the Middle East conflict had increased uncertainty and that inflation remained somewhat elevated. Stephen Miran dissented in favour of a quarter-point reduction.

The European Central Bank also maintained its policy rates, leaving the deposit facility rate at 2.00%. However, the ECB substantially increased its 2026 inflation projection to 2.6% and lowered its growth forecast to 0.9%, reflecting the impact of higher energy prices and the deteriorating global outlook.

The Bank of England maintained Bank Rate at 3.75% in a unanimous 9-0 decision. This represented a dramatic change from February, when four policymakers had favoured a rate reduction. The Committee concluded that the new energy shock increased the risk of higher near-term inflation and potentially more persistent wage and price pressures.

Government bonds also declined as investors rapidly unwound expectations for monetary easing. The US 10-year Treasury yield rose around 33 basis points to approximately 4.3%, while the UK 10-year gilt yield increased approximately 68 basis points and briefly exceeded 5% for the first time since 2008.

The investment environment therefore changed substantially during March. Markets moved from debating the timing of additional rate cuts towards considering whether some central banks might eventually need to raise rates again if the energy shock persisted.

Key Themes During March

• The Middle East conflict became the dominant global market event.
• Shipping through the Strait of Hormuz was severely disrupted.
• Brent crude moved above $100 per barrel during the month.
• The S&P 500 declined approximately 5.0%.
• European and Asian equities suffered substantially larger losses.
• The Federal Reserve maintained rates at 3.50%-3.75%.
• The ECB maintained its deposit rate at 2.00%.
• The Bank of England held Bank Rate at 3.75% unanimously.
• Government-bond yields rose sharply as rate-cut expectations collapsed.
• Energy security returned to the centre of global investment strategy.

Global Economic Overview

The global economic outlook deteriorated considerably during March as the Middle East conflict created a simultaneous inflation and growth shock. Higher oil, gas, fertiliser and transport costs threatened household purchasing power and corporate margins while complicating the ability of central banks to support weakening economic activity.

Middle East Energy Shock

The conflict involving Israel, the United States and Iran spread across the Middle East and included attacks affecting energy infrastructure and commercial shipping. Traffic through the Strait of Hormuz, through which roughly one-fifth of global oil and liquefied-natural-gas supply normally passes, almost came to a halt.

Brent crude traded above $100 per barrel ahead of the Bank of England's March meeting, approximately 60% higher than levels prevailing when its February forecasts were prepared. European wholesale gas prices also increased by around 60% from pre-conflict levels.

The shock revived comparisons with earlier periods in which sharply rising energy prices weakened economic activity while simultaneously increasing inflation. Central-bank officials avoided drawing direct parallels with the 1970s, but markets increasingly priced a stagflationary risk scenario.

United States

US economic data had already begun to soften before the full effects of the energy shock appeared. February payrolls unexpectedly declined by approximately 92,000 and unemployment increased to 4.4%. Fourth-quarter GDP growth was revised down to an annualised 0.7%, while March business surveys pointed towards weaker activity and sharply higher input costs.

Consumer-price inflation remained 2.4% year-on-year in February, but producer prices increased more strongly than expected. Importantly, those readings largely preceded the significant March increase in energy prices.

Federal Reserve

The Federal Reserve maintained its target range at 3.50%-3.75% on 18 March. The Committee described economic activity as continuing to expand at a solid pace but noted low job gains, somewhat elevated inflation and unusually high uncertainty surrounding the Middle East.

Eleven policymakers supported the decision, while Stephen Miran preferred a reduction of 25 basis points. Markets nevertheless interpreted the overall meeting as more cautious about easing because of the potential inflationary consequences of the energy shock.

United States Trade Policy

Trade policy remained an additional source of uncertainty. Following a Supreme Court ruling concerning the administration's use of emergency tariff authority, the US government replaced affected tariffs with a temporary uniform 10% tariff under alternative legal powers.

Although the effective tariff burden was lower than some measures implemented during 2025, businesses continued to face uncertainty over the longer-term structure of US trade policy.

Eurozone

The ECB maintained its three key rates on 19 March, leaving the deposit rate at 2.00%, main refinancing rate at 2.15% and marginal lending rate at 2.40%. The central bank stated that the Middle East war had created upside risks to inflation and downside risks to growth.

ECB staff revised expected 2026 inflation to 2.6%, compared with a lower forecast in December, while expected economic growth was reduced to 0.9%. The principal reason was the increase in energy prices and its effect on household income, business costs and confidence.

March's preliminary eurozone inflation estimate subsequently increased to around 2.5%, while the composite PMI declined from 51.9 to 50.5, highlighting the difficult combination of rising prices and weakening activity.

United Kingdom

The Bank of England maintained Bank Rate at 3.75% unanimously. The decision represented a dramatic shift from February's 5-4 hold, when four members had preferred a cut. Several policymakers stated that without the Middle East conflict they would likely have supported easing in March.

The Bank estimated that CPI inflation could remain between approximately 3% and 3.5% over the following quarters if prevailing energy prices persisted. UK GDP had grown only 0.1% during the fourth quarter and was flat in January, leaving the economy with limited momentum before the energy shock.

Japan

The Bank of Japan maintained its policy rate at 0.75%. Officials continued to consider eventual normalisation but recognised that rising imported energy costs represented a significant risk for the economy.

Japan's status as a major energy importer made the economy particularly vulnerable to disruption in Middle Eastern oil and gas supplies.

China

China's economy proved somewhat more insulated than several regional peers. Purchasing-managers data remained in expansion territory, while earlier strategic accumulation of oil inventories provided some protection against the immediate energy shock.

The People's Bank of China maintained its major loan prime rates unchanged for a tenth consecutive month.

Global Outlook

The global outlook became unusually dependent upon the duration of the energy disruption. A relatively short conflict could produce a temporary inflation spike followed by weaker demand and renewed easing. A prolonged closure of important shipping routes could instead create persistent inflation, supply shortages and pressure for tighter monetary policy.

Equity Markets

Global equity markets declined sharply during March as higher energy prices, rising government-bond yields and weaker economic expectations reduced investor appetite for risk. Energy producers were one of the few areas to benefit materially.

United States

The S&P 500 declined approximately 5.0%, although a nearly 3% rally on the final trading day reduced what had been a substantially larger monthly loss. The Nasdaq Composite fell approximately 4.7% and the Russell 2000 approximately 5.0%.

The equal-weighted S&P 500 declined approximately 6.0%, ending the broadening trend that had supported smaller and non-technology companies during January and February.

Energy

Energy was the only major S&P 500 sector to advance during March. The sharp rise in crude prices increased expected cash flow for producers and strengthened the strategic value of domestic energy infrastructure.

Technology

Technology companies remained under pressure after February's AI-driven valuation reassessment. Higher bond yields compounded the weakness because long-duration growth valuations became less attractive as discount rates increased.

Semiconductor and data-centre demand remained structurally strong, but investors increasingly considered the impact of higher electricity, transport and financing costs on future infrastructure projects.

Consumer Companies

Consumer-oriented businesses faced several simultaneous pressures. Higher fuel and utility costs reduced household disposable income, while transportation and manufacturing expenses threatened corporate margins.

Financials

Financial companies declined as weaker growth and wider credit spreads outweighed the potential benefit of higher interest rates. Investors became increasingly attentive to credit quality, refinancing risks and private-credit exposure.

Europe

European equities suffered substantially larger losses than US markets because the region remained comparatively dependent upon imported energy. The MSCI Europe ex UK Index declined approximately 8.2% in euro terms and 10.3% in US-dollar terms.

Within the STOXX Europe 600, energy gained approximately 14.8% while most other sectors declined. Consumer-related companies, real estate, automotive businesses, construction and technology were among the weakest performers.

United Kingdom

The MSCI UK Index declined approximately 5.9% in sterling terms, while the FTSE All-Share fell roughly 6.7%. Rising gilt yields, weaker growth expectations and the energy shock overwhelmed the benefit received by oil and gas producers.

Japan

Japanese equities reversed much of February's exceptional rally. The TOPIX declined approximately 10.4% in yen terms and the Nikkei 225 fell around 12.7%. Higher imported energy costs and rising bond yields outweighed expectations of domestic fiscal support.

China and Asia-Pacific

The MSCI China Index declined around 7.7% in US-dollar terms but outperformed several regional peers. The broader MSCI Asia Pacific ex Japan Index fell approximately 13.2%.

South Korea fell approximately 24.6% after its extraordinary February rally, while Taiwan declined around 12.8%. Energy import dependence and profit-taking in semiconductor markets amplified the correction.

Emerging Markets

The MSCI Emerging Markets Index declined approximately 13.0%, erasing its year-to-date gain and recording its weakest month since March 2020. Energy-importing economies generally suffered the greatest pressure.

India declined approximately 14.5%, while Colombia gained 8.5% as its status as an energy exporter provided relative protection.

Indicative March Performance

Fixed Income Markets

March produced an unusually severe sell-off in government bonds as the surge in energy prices forced investors to reconsider the path of global inflation and monetary policy. The Bloomberg Global Treasury Index declined approximately 1.9% in US-dollar terms.

US Treasuries

The US 10-year Treasury yield rose approximately 33 basis points to around 4.3%. Markets substantially reduced expectations of Federal Reserve cuts during 2026 as investors considered the possibility that higher energy prices could keep inflation above target.

UK Gilts

UK government bonds experienced an especially severe repricing. The 10-year gilt yield rose approximately 68 basis points and briefly moved above 5% for the first time since 2008. Two-year yields increased by almost 90 basis points.

Markets moved from expecting additional Bank of England cuts to pricing the possibility of future increases, although Bank officials cautioned against drawing premature conclusions from volatile market pricing.

European Government Bonds

The German 10-year Bund yield increased approximately 36 basis points. Markets began considering whether persistent energy inflation could eventually require the ECB to reverse part of its earlier easing cycle.

Japanese Government Bonds

The Japanese 10-year government-bond yield rose approximately 23 basis points as markets balanced inflationary pressure from imported energy against the possibility that geopolitical uncertainty could delay further Bank of Japan tightening.

Corporate Credit

Corporate bonds also weakened. Global investment-grade corporate debt declined approximately 2.9%, while global high-yield bonds fell roughly 2.5%. Credit spreads widened as investors demanded additional compensation for economic and refinancing risk.

Private Credit

The March shock increased the importance of stress testing private-credit portfolios against higher-for-longer interest rates, weaker operating cash flow and rising input costs.

Energy-intensive borrowers, transport companies and businesses with weak pricing power faced particular pressure, while lenders to energy producers and infrastructure assets experienced a potentially more favourable revenue backdrop.

Foreign Exchange

Currency markets were dominated by safe-haven demand, changing rate expectations and the differing exposure of individual economies to imported energy.

US Dollar

The US dollar strengthened as investors sought liquidity and markets reduced expectations of Federal Reserve easing. The dollar's status as a defensive currency and the United States' comparatively strong domestic energy position provided additional support.

Euro

The euro weakened as investors focused on Europe's exposure to imported oil and gas and the potential deterioration in regional growth.

Sterling

Sterling also weakened against the dollar as the UK faced both higher imported energy costs and subdued domestic economic activity.

Japanese Yen

The yen produced mixed performance. Traditional safe-haven demand provided support during periods of severe risk aversion, but Japan's substantial dependence upon imported energy represented a negative fundamental influence.

Emerging-Market Currencies

Energy-importing emerging-market currencies came under significant pressure. India's rupee reached record lows as higher oil costs increased expected inflation and worsened the country's external-balance outlook.

Commodity Currencies

Currencies associated with energy-exporting economies generally proved more resilient because higher commodity prices improved their terms of trade.

Commodities

Commodities became the central driver of financial markets during March. Energy prices surged because of disruptions to Middle Eastern production and shipping, while several other materials were affected by transportation constraints and changing inflation expectations.

Oil

Brent crude traded above $100 per barrel ahead of the March central-bank meetings, around 60% above levels prevailing before the conflict intensified. The Strait of Hormuz disruption created significant uncertainty about the availability and transport of Middle Eastern oil.

International Energy Agency members announced a coordinated release of strategic reserves, although the Bank of England noted that these barrels would take time to reach refineries and would only partly offset the reduction in normal supply.

Natural Gas

European wholesale natural-gas prices also rose approximately 60% from pre-conflict levels. Futures markets implied substantially higher UK household-energy costs later in the year if the disruption persisted.

Gold

Gold experienced significant volatility. Safe-haven demand remained structurally supportive, although rapidly rising bond yields and leveraged position reductions created periods of sharp weakness.

Fertiliser and Industrial Inputs

The energy disruption extended beyond oil and gas. Fertiliser, helium and transportation costs increased, raising the prospect of additional pressure on agriculture, manufacturing and food prices.

Copper and Industrial Metals

Industrial metals experienced conflicting influences. Higher production and transport costs supported prices in some markets, while deteriorating global growth expectations reduced expected industrial demand.

Investment Perspective

March demonstrated that commodity supply security had become a major macroeconomic variable. Energy production, storage, transport and strategic reserves increasingly represented not only commodity investments but also national-security infrastructure.

Digital Assets

Digital assets remained volatile during March as the global risk-off environment, rising bond yields and a stronger dollar reduced demand for speculative investments.

Bitcoin

Bitcoin remained sensitive to global liquidity and changes in real interest-rate expectations. The sharp repricing of expected central-bank policy created a less favourable environment than the falling-rate scenario investors had anticipated at the beginning of the year.

Ethereum

Ether and broader smart-contract assets remained exposed to the same deterioration in global risk appetite while continuing to face competition among blockchain networks.

Institutional Adoption

Institutional development of custody, stablecoins and tokenised securities continued despite weaker speculative conditions. This remained increasingly distinct from the short-term performance of cryptocurrency markets.

Risk Considerations

• Higher bond yields reduced the relative attraction of speculative assets.
• A stronger dollar tightened global financial conditions.
• Geopolitical shocks remained capable of producing rapid deleveraging.
• Institutional tokenisation continued independently of cryptocurrency prices.
• Liquidity and position sizing remained particularly important during periods of macroeconomic stress.

Private Equity

Private-equity conditions became more challenging during March as public valuations declined, financing costs rose and uncertainty increased around inflation, energy prices and economic growth.

Deal Activity

Transactions requiring substantial leverage or exposure to discretionary consumer spending became more difficult to underwrite. Healthcare, essential business services, energy infrastructure and defence remained comparatively resilient.

Despite the market disruption, major corporate transactions continued to be announced across pharmaceuticals, consumer goods and beverages, suggesting that long-term strategic confidence had not disappeared.

Financing

The dramatic rise in government-bond yields reduced the benefit private-equity sponsors had expected from central-bank easing during 2026. Floating-rate financing remained expensive and longer-term fixed-rate borrowing also became less attractive.

Energy Exposure

Due diligence increasingly examined direct and indirect energy exposure. Businesses faced higher electricity, fuel, freight and raw-material costs even where energy represented only a small proportion of reported operating expenditure.

Private Credit

Credit underwriting required renewed stress testing against higher rates and slower growth. Companies with thin interest coverage or limited pricing power became increasingly vulnerable.

Exits

The deterioration in public markets complicated IPO timing and reduced confidence in comparable-company valuations. Strategic sales and continuation structures remained important alternatives.

Secondaries

Private-market volatility could create attractive opportunities in secondary transactions where institutional sellers required liquidity or sought to rebalance portfolios after public-market declines.

CE Global Private Equity Observations

• Energy exposure became a major underwriting consideration.
• Higher bond yields reduced expected financing relief.
• Essential infrastructure and services appeared comparatively defensive.
• IPO conditions became more difficult.
• Market dislocation could create attractive secondary opportunities.

Artificial Intelligence & Technology

Artificial intelligence remained a transformative structural theme during March, but geopolitical and energy developments demonstrated how dependent the digital economy remained upon physical infrastructure.

AI and Electricity

The sharp increase in energy prices reinforced the importance of electricity availability and cost within data-centre economics. AI infrastructure requires enormous quantities of reliable power, meaning energy security became increasingly relevant to technology valuations.

Data Centres

Developers faced the possibility of higher electricity, backup-generation and construction costs. Projects with long-term power agreements or access to dedicated generation were better insulated from short-term commodity volatility.

Semiconductors

Semiconductor demand remained structurally strong, but the sharp March declines in South Korean and Taiwanese equities demonstrated the sector's sensitivity to global risk appetite, energy prices and supply-chain disruption.

Software and Agentic AI

The disruption concerns that affected software companies in February remained relevant. Investors continued evaluating whether agentic AI would replace selected applications or strengthen platforms with proprietary data and deeply integrated workflows.

Technology Infrastructure

March reinforced the value of infrastructure supporting technology rather than software alone. Electricity networks, backup generation, cooling, fibre and resilient supply chains remained essential regardless of which AI models ultimately gained market share.

Technology Risks

• Higher energy costs can materially affect data-centre economics.
• Semiconductor supply chains remain geopolitically concentrated.
• Higher bond yields reduce growth-stock valuations.
• Agentic AI continues to threaten selected software business models.
• Physical infrastructure remains critical to digital growth.

Sector Spotlight

Energy Security and Strategic Infrastructure

March's sector spotlight examines energy security after disruption to the Strait of Hormuz demonstrated the vulnerability of global economies to concentrated oil and gas supply routes.

Energy Transportation

The Strait of Hormuz carries roughly one-fifth of global oil and liquefied-natural-gas supply under normal conditions. Severe disruption therefore has consequences extending far beyond the Middle East.

Strategic Storage

Government petroleum reserves can provide temporary relief during supply interruptions, but March demonstrated that strategic inventories cannot immediately replace normal commercial production and transport networks.

LNG Infrastructure

Liquefied-natural-gas terminals, storage facilities and alternative pipeline connections provide countries with greater flexibility when traditional supply routes become unreliable.

Domestic Generation

Nuclear, renewable, natural-gas and storage projects can reduce dependence upon imported fuels while improving electricity-system resilience.

Grid Resilience

Energy security also requires resilient electricity networks. Data centres, industrial facilities and transport electrification increase the economic cost associated with power shortages or transmission constraints.

Private-Market Opportunities

• Energy storage
• LNG terminals and infrastructure
• Domestic power generation
• Electricity transmission
• Grid-resilience technology
• Fuel logistics and strategic storage

Principal Risks

Energy-security investments remain sensitive to regulation, commodity prices, environmental policy and geopolitical change. Assets developed during periods of exceptionally high prices can become uneconomic if supply conditions normalise rapidly.

Investment Perspective

March demonstrated that energy security has become a structural rather than purely cyclical investment theme. Assets that improve supply diversification and system resilience can retain strategic value even after immediate commodity-price shocks subside.

Regulatory Update

March's regulatory environment was dominated by energy security, inflation risk, trade policy and financial-market resilience.

Monetary Policy

The Federal Reserve, ECB and Bank of England all maintained rates as policymakers attempted to evaluate the inflationary and economic consequences of the Middle East conflict.

Energy Security

Governments increased attention on strategic reserves, shipping security and alternative energy supplies following the disruption to the Strait of Hormuz.

Shipping and Supply Chains

Businesses needed to reassess transportation routes, insurance, inventory and contractual force-majeure provisions where Middle Eastern shipping formed part of critical supply chains.

US Tariff Policy

The replacement of selected emergency-power tariffs with a temporary uniform 10% tariff reinforced the need for businesses to monitor the legal basis as well as the headline rate of US import duties.

Private Credit

Wider credit spreads and higher government yields increased the importance of realistic valuations and liquidity assumptions within private-credit portfolios.

Artificial Intelligence

AI governance remained important, but March also emphasised operational resilience. Automated systems and data-centre infrastructure increasingly required contingency planning around electricity, communications and physical supply disruptions.

Compliance Priorities

• Stress-test operations against prolonged energy disruption.
• Review shipping, insurance and force-majeure provisions.
• Monitor changing central-bank policy expectations.
• Review the legal basis and application of US tariffs.
• Update private-credit and equity valuations for higher discount rates.
• Strengthen business-continuity planning for critical digital infrastructure.

Looking Ahead

Markets entered April facing an unusually wide range of possible economic outcomes. The duration of the Middle East conflict and the restoration of normal shipping through the Strait of Hormuz were likely to determine the near-term path of oil prices, inflation expectations and monetary policy.

Middle East Conflict

A rapid restoration of energy flows could reverse part of March's inflation shock and support both bonds and equities. A prolonged disruption could instead maintain oil and gas prices at elevated levels and deepen the slowdown in energy-importing economies.

Federal Reserve

The Federal Reserve's next decision was scheduled for late April. Investors would focus on whether weaker employment and economic growth outweighed the inflationary effects of higher energy prices.

Bank of England

The Bank of England's unanimous March hold represented a pause rather than necessarily a permanent change in direction. Committee members indicated that a short-lived energy shock combined with weaker demand could eventually justify renewed easing, while a prolonged inflation shock might require tighter policy.

European Central Bank

The ECB entered April with its deposit rate at 2.00% but a substantially higher inflation forecast. The duration of the energy disruption would determine whether policy remained unchanged or eventually required tightening.

Bank of Japan

The Bank of Japan would continue assessing whether its gradual normalisation programme remained appropriate. Higher imported energy prices increased inflation but simultaneously weakened household purchasing power and corporate margins.

Corporate Earnings

First-quarter earnings would provide the first meaningful corporate assessment of the energy shock. Investors would focus on energy costs, freight, pricing power, supply chains and consumer demand.

Commodities

Oil and gas would remain the principal global macroeconomic variables. Fertiliser and food prices could become increasingly important if the disruption persisted because of their effect on household inflation expectations.

Private Credit

Higher interest-rate expectations and weaker growth could expose companies that had relied upon rapid monetary easing to improve debt affordability. Interest coverage, liquidity and maturity schedules would require renewed attention.

Private Markets

Market volatility may create opportunities in infrastructure, energy security, secondaries and structured capital. However, investments should be underwritten against normalised rather than crisis-level commodity prices.

CE Global Private Equity Perspective

March represented a major change in the 2026 investment environment. Markets entered the month expecting continued disinflation and gradual monetary easing; they ended it confronting a substantial energy shock and the possibility that interest rates could remain higher for longer.

CE Global Private Equity believes that energy security, electricity infrastructure, industrial resilience, healthcare, defence and cybersecurity have become increasingly important investment themes. Businesses providing essential services or helping customers reduce exposure to energy and supply-chain disruption may benefit from durable demand.

The conflict also reinforces the importance of avoiding excessive leverage. Companies capable of absorbing higher financing and input costs without requiring immediate refinancing are better positioned to withstand uncertain macroeconomic conditions.

Artificial intelligence remains a powerful long-term opportunity, but March demonstrated that even the digital economy ultimately depends upon physical energy, communications and supply-chain infrastructure. Investment opportunities that sit at the intersection of digital growth and essential physical infrastructure remain particularly compelling.

For private-market portfolios, CE Global Private Equity continues to favour recurring cash flow, conservative capital structures, diversified suppliers and multiple exit routes. Volatile conditions may create attractive entry points, but investment assumptions should not depend upon a rapid resolution of either geopolitical or monetary-policy uncertainty.

This market review is provided for general information and discussion purposes only. It does not constitute investment, legal, tax or other professional advice, nor an offer or solicitation to purchase or sell any security, financial instrument or investment product. Market values can rise or fall, and past performance is not a reliable indicator of future results.