Author: Spencer Maynard Wealth Management

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%) because the country is a net oil and 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. Short- 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.

Markets contended with several major macroeconomic events over the month. The US Supreme Court ruled that President Trump was not authorised to impose tariffs under the International Emergency Powers Act (or IEEPA). In response, Trump complied with the ruling however pivoted to alternative measures, issuing a 10% tariff on all countries based on another statute (Section 122 of the Trades Act of 1974). Last week, Trade Secretary, Scott Bessent announced that the 10% tariff will soon be increased to 15%.

Tariff tribulations were overshadowed at the end of the month when the US and Israel launched a series of airstrikes and military operations in Iran that led to the assassination of Iranian Supreme Leader Ayatollah Ali Khamenei. Iran’s response was swift and included military retaliation across the region against Israel and several other Gulf states. So far, low cost Shahed drones have proven to be particularly effective at evading more expensive higher-tech air defences. Needless to say, things are moving very fast at the moment and there’s different developments to digest every day. From our perspective, it’s important to avoid making kneejerk reactions and focus on diversification to help weather market volatility.

Focusing on markets, global equities posted gains (+2.80%) in February. Many of the themes dominating the end of 2025 have continued into 2026 causing the US equity markets to stay somewhat subdued (+1.5%) while other developed markets and emerging markets (+7.2%) carried on outperforming. Looking at developed markets, Japan was a standout returning +10.4% in February alone. This was driven by Prime Minister Sanae Takaichi’s Liberal Democratic Party (LDP) winning a landslide election victory, securing more than two thirds of all seats in the lower chamber. It was the largest political victory in modern Japanese history and markets reacted positively to the clear signal on the country’s political and economic direction. UK equities also posted decent gains of 6.4% driven by large cap names and sectors that benefited from both the AI rotation and concerns about rising oil prices.

US equity returns have been modest, returning just under 1% so far this year. Interestingly, we have seen a meaningful rotation away from mega-cap US technology and growth names over the past couple of months. While some earnings remain strong, there have been concerns about the likely return on investment from artificial intelligence (AI). Companies who have announced more capital expenditure have typically been punished, for example early in the month Amazon had $300bn wiped off their market capitalisation when they reported a 25% higher than expected increase in capital expenditure.

Worries about the impact AI agents and tools will have on software and wealth management firms dragged share prices down in both sectors. In the final week of February, a viral ‘doomsday’ essay by Citrini Research spooked investors, sparking another sell off that hit firms like Uber and Mastercard particularly hard. Conversely, we’ve started to see other areas such as value and small to mid-cap stocks start to outperform.

Bond markets posted decent gains, particularly in the latter half of the month. Growing economic uncertainty, moderating inflation signals and increasing geopolitical risks all helped push bond prices up. Expectations of lower interest rates helped infrastructure related investments while gold also benefitted from geopolitical uncertainty (+7%).

Generally, after a strong start to the year there will undoubtedly be bumps in the road, but even this early into the year “avoiding the noise” seems to be the key message.

Over the weekend (and continuing as we type), the United States and Israel launched coordinated military strikes against Iran, targeting missile infrastructure, air defence systems and senior political and military leadership. As we understand it, Iran’s Supreme Leader, Ayatollah Ali Khamenei, was killed in the initial strikes, and Iran has announced 40 days of official mourning. Many of Iran’s senior military personnel are also dead.

Iran’s Islamic Revolutionary Guard Corps (IRGC), Iran’s military force, have vowed retaliation, seeing it as a “legitimate duty and right” and plans what it describes as “the most ferocious offensive operation in history” against Israeli and US operations in the region and in nearby countries. So far, Iran’s response has been swift. Iranian forces launched ballistic missiles and drones targeting Israel and US military assets across the Gulf. This includes bases in Qatar, Kuwait and Bahrain. While most of the missiles have been shot down, a few have got through, with three US servicemen reported to have been killed and Trump warning “there will likely be more”. This all suggests that the initial Iranian response has had a limited impact.

From a geopolitical perspective, the headlines are significant. From a market perspective, the focus will be on whether oil supply is cut, and especially whether flows through the Strait of Hormuz (the transit point of c20% of global seaborne oil) are disrupted, and for how long.

What would likely be the short-term impact on markets? The impact is as we expect: the FTSE has opened marginally down (-0.8%), alongside Asian markets: the Hong Kong and Japanese indices are down 1.4% and 1.5% respectively. The major losers are probably airline stocks, hospitality companies and banks. We might expect bond markets to struggle should inflation fears increase. US technology stocks may also fall if inflation fears re-emerge in the US. By contrast, the near-term winners are likely defence stocks, energy companies, oil and gold. Oil prices are up 8%. But as you can see, the moves are not significant, because the long-term impact on stock markets is unlikely to be significant unless things escalate meaningfully. As we have mentioned before, the market impact of these events tends to be temporary and less severe than the headlines would have us believe. History has repeatedly shown that staying invested has usually been the most sensible option for long-term investors. We will be closely monitoring markets and keeping you updated should anything change.

Global equities were slightly down in January. This was due to negative returns in the US markets which fell-1.3% in sterling terms. With the US making up 70% of the global benchmark it has a significant impact on the performance of the overall global index. However, once you take out the US, the story was much more positive in every other equity market. Our home market had a strong month, posting positive returns of +3.1%, but the standouts were Asia and emerging markets which delivered +4.8% and +6.8% respectively. The dollar continued to decline, helping both regions. European and Japanese markets also posted strong returns.

Looking at the UK equity market, it was pleasing to see small caps and the Alternative Investment Market (AIM) return far more than the broader market (+4.6% & +6.8% respectively). These smaller company stocks have been out of favour with investors for some time, but expectations of further interest rate cuts from the Bank of England (BoE) should help this part of the market, which tends to be more sensitive to borrowing costs. Small-cap businesses also tend to be more insulated from geopolitical noise, which was rife over the month.

President Trump gave markets a lot to digest in January. Just two days into the year, the US launched airstrikes on military bases in Caracas and captured Venezuelan President Nicolás Maduro in a 2am raid. Within days, the US intervention in Venezuela was knocked off the headlines when Trump stepped up his campaign to take “ownership” of Greenland and threatened to impose new tariffs on eight Nato allies over their opposition to his planned takeover of the country.

Domestically, protests erupted across the US following the murders of Renee Good and Alex Pretti by ICE and Border Patrol agents. Concerns about the independence of the Federal Reserve were heightened when the Department of Justice (DOJ) launched a criminal investigation into Fed Chair, Jerome Powell. In response, Powell said he was being threatened with criminal charges because the Fed had been setting interest rates, “based on our best assessment of what will serve the public, rather than following the preferences of the president.” Later in the month, Trump nominated Kevin Warsh to replace Powell when he leaves his post in May. Warsh has backed maintaining higher interest rates in the past and markets reacted positively to what many perceive to be a safer choice than some of the other rumoured candidates. However, Warsh’s ties to Trump allies like Ronald Lauder, and the DoJ’s investigation into Powell could hold up the confirmation process.

Although most equity regions brushed off all the political drama, gold rallied extremely hard on these tensions with the asset class +13.5% over January. More broadly, commodities had a strong month delivering a return of +7.3%. Oil and gas prices rallied over double digits on the back of colder winter weather and an associated fall in storage levels.

With this general risk-on environment (despite all the geopolitical risks), fixed income markets were mainly negative with global and emerging market bonds declining slightly (around -1.8%). UK government bonds were flat.

Equity markets finished the year on a strong note with most regions delivering double digit returns over the period and hitting all-time highs. This was achieved despite several potential headwinds including Trump’s tariff hikes, growing concerns about technology valuations and recent concerns of a potential Chinese slowdown.

Looking at December, the UK was a strong performer, returning +2.3%, bolstered by strong corporate earnings and the hope for further rate cuts, and finished the quarter as the best performing equity market. The FTSE 100 went on to surpass 10,000 points for the first time after the New Year break. Europe led markets (+2.5%) on the back of increased stimulus spending and improving economic growth. Emerging Markets also fared well over the month (1.1%) and over the year. They benefitted from strong growth prospects and a weakening dollar. Over the quarter, Latin America was the best performing region benefitting from commodity producers (gold and copper) while Chinese stocks fell over concerns of a potential slowdown and signs of further weakness in the Chinese property market.

The US equity market softened -0.6% over the month but still added just under 10% for the year. 2025 was, in recent times, an outlier year where other major regions significantly outperformed the US equity market in sterling terms. This was, as noted above, largely attributed to dollar weakness as the dollar experienced its largest annual decline since 2009. Artificial Intelligence (AI) has been a dominant theme in the US driving most of the gains over the year. However corporate profits have broadly outperformed expectations and GDP growth remains quite strong compared to developed market counterparts.

Though returns across bond markets were subdued relative to equity markets, they were still positive providing a good ballast to portfolios. Government bonds (Gilts and US Treasuries) both generated gains on the view that the BoE and Fed are likely to cut rates into the New Year. Credit strategies also posted gains as corporate profits and balance sheets remain robust.

Within alternatives, infrastructure and real estate performed reasonably well over the year providing mid to high single digit returns. Precious metals had a particularly strong run in 2025 with physical gold prices rallying over 50% in 2025. This was based on several factors, including investors seeking a safe haven amid geopolitical uncertainty, Central Bank purchases as part of a broader diversification strategy, as well as weakness in the US dollar.