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Oil shock and geopolitical tensions hit global markets
20 March 2026
Global markets faced a challenging week as a sharp spike in oil prices and escalating geopolitical tensions weighed on investor sentiment. Rising energy costs, driven by disruption in the Strait of Hormuz, intensified inflation concerns and pressured equities worldwide, while bond yields climbed as markets reassessed interest rate expectations.
All returns in GBP terms to Friday close
| Global Stocks | US Stocks | UK Stocks | EU Stocks | EM Stocks | Japan Stocks | Gilts | GBP/USD |
| -0.8% | -0.2% | +0.0% | -0.5% | -1.1% | -2.6% | -1.1% | -1.4% |
Market update
US equities fell -1.6% over the week as escalating conflict between the US, Israel and Iran lifted oil prices and fuelled inflation concerns, weighing on risk appetite and pressuring growth‑sensitive sectors. In GBP terms, US equities outperformed their local return (-0.2% vs -1.6%) as the dollar strengthened due to safe-haven demand over the week. UK equities were flat, supported by their greater tilt toward defensive sectors in an environment of heightened geopolitical risk. EU equities slipped -0.3% amid stagflation worries as higher energy prices intensified pressure on the region’s commodity‑importing economies. Emerging‑market equities declined -1.3%, with risk aversion rising across regions most exposed to energy‑price shocks. Japanese equities fell -2.2% as regional markets weakened on surging oil prices and concerns about global growth.
US Treasury 10-year bond yields rose +14 basis points as investors priced in the inflationary impact of higher oil prices and reassessed expectations for Federal Reserve policy amid ongoing geopolitical tensions. UK 10-year gilt yields climbed +19 basis points, with markets scaling back expectations of near‑term Bank of England rate cuts as the energy‑driven inflation shock heightened concerns about the UK’s sensitivity to rising oil and gas prices.
Gold fell -2.9% in US dollar terms as a stronger dollar and rising rate expectations weighed on bullion despite ongoing geopolitical risk, while in GBP terms the decline was milder (-1.5%) due to sterling weakness. Brent crude oil prices surged to above $115 per barrel on Monday (9th March) as shipping through the Strait of Hormuz was shut down over the weekend. Prices cooled partially following the initial spike, but still ended the week at $103.
Macro news
Geopolitics
On Wednesday, Iran intensified efforts to halt traffic through the Strait of Hormuz, a chokepoint for 20% of global oil. Drone and missile strikes targeted critical infrastructure in Dubai, Kuwait, and Saudi Arabia. Oil prices spiked again above 95 USD/bbl, despite the announcement of the IEA members of the release of 400 million barrels of oil from the strategic reserves. Amid the chaos, a diplomatic breakthrough occurred in Eastern Europe. Ukraine accepted a 30-day ceasefire brokered by the U.S. during talks in Saudi Arabia.
US inflation
February’s headline inflation held steady at an annual rate of 2.4%, matching January’s pace. The overall index was driven by a surge in apparel (likely due to tariffs) and natural gas prices. Encouragingly, shelter inflation showed signs of easing. Market reaction was muted, as investors remain laser‑focused on geopolitical developments in the Middle East.
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