The first quarter of 2026 was a reminder that markets can change direction quickly.
January began with a sense of stability. Inflation appeared to be easing, growth was holding up, and investors were increasingly hopeful that interest rates might gradually come down later in the year. But by the end of March, that confidence had been tested.
Rising energy prices, renewed inflation concerns and weaker investor sentiment all combined to shift the market outlook. What started as a relatively calm quarter finished in a much more uncertain place.
Jan
A steady pace
The year began on relatively stable footing. Markets moved within a narrow range, with investors still leaning on the same themes that shaped the end of 2025 - easing inflation, steady growth, and the expectation that interest rates could gradually come down over time.
There were no major surprises. Equity markets held up, economic data remained broadly in line with expectations, and confidence carried through from the previous quarter. It wasn’t a standout month, but it set a calm and balanced tone to begin the year.
Feb
Stability holds, but cracks emerge
February remained relatively contained on the surface, although some cracks began to emerge underneath.
Growth was still holding up, but inflation was proving more persistent than many had hoped. That left central banks cautious and markets increasingly sensitive to anything that might disrupt the path forward.
Late in the month, geopolitical tensions escalated sharply, particularly in the Middle East. Markets did not react immediately, but the change in tone was noticeable. Investors became more alert to the risk of disruption, especially across global energy supply.
Mar
Energy shock changes the narrative
March marked a clear turning point.
The escalation of conflict involving Iran triggered a sharp spike in oil and gas prices, with energy markets reacting quickly to concerns around supply disruptions. Prices surged significantly, creating ripple effects across the global economy.
This shift had a direct impact on markets. Higher energy costs pushed inflation expectations back up, delayed hopes of rate cuts, and tightened financial conditions. Equity markets sold off, reversing earlier gains, as investors moved more cautiously.
Sector performance became more uneven. Energy stocks performed strongly, benefiting from rising prices, while sectors more sensitive to costs — like consumer and transport — came under pressure. Technology stocks also became more volatile, particularly where valuations were already stretched.
In Australia, the story was similar. Resource stocks provided some support, but overall market performance was weighed down by global sentiment and a soft domestic backdrop. The RBA also moved to raise rates, responding to persistent inflation pressures despite slower growth
The March quarter was a reminder that markets can change direction quickly. What began with optimism around easing inflation and steadier growth ended with higher energy prices, renewed inflation pressure and a more uncertain outlook.
Looking ahead, much will depend on whether energy markets and global tensions begin to settle. If they do, markets may return to a more gradual path. If not, volatility could remain for some time.
For investors, the fundamentals still matter. Diversification, quality and a long-term view remain key when conditions become less predictable.