Market update – Quarter ended 31 March 2026

Markets started 2026 on a positive note but became more unsettled in March. This was largely driven by escalating conflict in the Middle East, disrupting the supply of oil and gas and causing their prices to jump sharply. Investors worry this will lead to higher inflation and lower economic growth. Let’s take a closer look at how this has impacted markets here and around the world.

Global

Due to the risk of higher inflation, interest rates rose around the world, leading to weaker bond returns. After a strong start to the quarter fuelled by continued strong profit growth, global share markets fell sharply in March, leading to an overall decline. In the United States, the share market fell 4.3%^[1] over the quarter; European share markets fell 3.6%^[2], while emerging markets fared better, returning 2.1%^[3] over the quarter after strong gains in January and February.

New Zealand

Economic conditions in New Zealand remained somewhat challenging. While there were signs of improving growth, a soft job market continued to put pressure on households. The Reserve Bank of New Zealand maintained a cautious approach, noting that while energy prices will lift inflation, they’ll want to see signs of “second round” effects (people and businesses changing their behaviour because they expect high inflation to continue) before adjusting their future policy decisions. The New Zealand share market fell 4.7%^[4] over the quarter. 

Bonds and currency

New Zealand bond returns fell over the quarter as investors considered the risk that higher energy prices could lead to an earlier increase in interest rates.

The New Zealand dollar ended the quarter slightly lower against the US dollar. After a strong start, it weakened in March as global uncertainty increased.

What this means

• Businesses: Higher energy prices increase costs and uncertainty, particularly for transport and energy‑intensive sectors. While a weaker currency can support exporters, it also adds to the cost of imported goods like fuel. Overall, businesses have become more cautious looking ahead.
• Consumers: Households started the year feeling more positive, but the Middle East conflict and higher fuel prices has dented confidence and put a strain on household budgets.
• Investors: Geopolitical events can create short‑term market swings, especially when they affect interest rates and growth outlooks. Diversification remains important in managing these risks.

Looking ahead

It’s unclear how long the conflict in the Middle East will last. Until there’s a resolution, markets are likely to experience ups and downs. It’s important to remember that this is a normal part of investing, particularly during periods of heightened uncertainty. For long‑term investors, staying invested in a fund that matches your goals and risk tolerance remains key.

[1] S&P 500 Total Return Index (USD)

[1] Euro Stoxx 50 Total Return Index (EUR)

[1] MSCI Emerging Market Index (Local)

[1] S&P/NZX 50 Index Gross