March 2026 market update: conflict, uncertainty and staying the course
Summer has officially ended, and with its departure, it’s time to look back on the beginning of this year. The past few weeks has unexpectedly brought the kind of geopolitical shock that rattles even the most seasoned investors. Even if the dust hasn’t settled, it's worth stepping back to understand what's happened, what it means for markets, and what, if anything, you should do about it.
A war in the Middle East
After a period of failed nuclear negotiations with Iran, beginning on 28th February, the United States and Israel launched joint military strikes codenamed “Epic Fury” (US) and “Roaring Lion” (Israel) against Iran. President Trump announced the operation in a video address, framing it as an effort to eliminate what he described as imminent threats from the Iranian regime, including its nuclear ambitions. The strikes targeted Iran’s leadership, security forces, nuclear programme, and missile sites.
Iran's Supreme Leader, Ayatollah Ali Khamenei, was killed in the initial strikes, along with dozens of senior officials. Iran has since retaliated extensively, launching attacks across the Gulf region, including Bahrain, Iraq, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE.
Trump stated that the strikes are intended to dismantle Iran's missile capabilities and navy and preventing it from obtaining a nuclear weapon, with the long-term goal of negating its ability to fund terrorism across the globe. Although the campaign was intended to be short and sharp, at the time of writing there is no identifiable endgame as hopes of a Venezuela style capitulation or public uprising are rapidly fading. The situation remains highly fluid.
How markets have responded
The immediate market reaction was not as dramatic as some expected. Goldman Sachs chief executive David Solomon noted that he found the market reaction "more benign" than he would have expected given the magnitude of events — a signal that investors, while cautious, are not panicking.
Oil prices immediately surged to their highest level in over eight months upon news of the attack with international benchmark (Brent Crude) surging from 6.7% to US$77.74 per barrel as of March 2nd. The price then rose to over US$100 per barrel, fell back to about US$80 per barrel and then climbed back up again. Each of these rapid price movements was in response to developments in the war. As we have all seen over the last couple of weeks, any crude oil price increases flow through to the petrol pump price in New Zealand given oil is a globally traded commodity. While pain at the pump is an immediate concern, the wider and arguably more significant concern is that persistently high petrol prices result in higher inflation and stifle worldwide economic growth.
Looking at other asset classes, by March 4th gold briefly climbed above US$5,400 per ounce, and the US dollar strengthened as investors moved into traditional safe-haven assets. Equity markets fell initially but claimed back much of the losses soon afterwards. As the war has dragged on and the conclusion remains uncertain, global share markets have declined albeit with some up days and overall, rapidly fluctuating prices. As at the time of writing the S&P500 is around only 5% below its record closing high earlier this year and still up 17% over the last year
The concern driving these falls is energy supply. Ships sailing through the Strait of Hormuz – a waterway situated just south of Iran and through which roughly 20% of global oil passes (approximately 20 million barrels a day) are being attacked by Iran even as the US claims it will protect this vital shipping route. Shipping tankers and planes are avoiding the Strait and surrounding airways due to the ongoing conflict as Iran declared open hostility to those who tried to pass, stating they would “attack and set ablaze any ship attempting to cross”. It has successfully carried out this threat against a handful of ships. Despite Iranian officials’ threats, President Trump stated the US would deploy it’s Navy to protect oil tankers crossing the waterway and ease pressure of global oil supply chains, subsequently asking its allies for help and the market is still assessing whether that would be sufficient to protect ships through this vital waterway.
AI and the Pentagon: a conflict within a conflict
Over the few years, Artificial Intelligence (AI) has been one of the dominant themes affecting the markets. This has seen the rise of corporate behemoths like Nvidia and more recently concerns about the extent to which AI will be integrated into our lives.
As an example of how dynamic and evolving this area can be is AI’s potential impact on the Iran conflict, the Trump administration ordered federal agencies and military contractors to cease business with Anthropic — the maker of the AI model “Claude” — after the company refused to allow the Pentagon to use its technology without restrictions.
The dispute centred on two conditions Anthropic had included in its $200 million Pentagon contract: a prohibition on Claude being used for the mass surveillance of American citizens, and a prohibition on its use in fully autonomous weapons systems — ones that could make lethal decisions without human intervention. The Pentagon demanded these restrictions be removed, insisting it required AI tools available for "all lawful purposes”. Anthropic's CEO Dario Amodei refused, stating the company could not "in good conscience" comply.
Their stance has resulted in the company rocketing to an arguably favourable position with the American public, not only standing as a steady rival to AI giant ChatGPT – but being celebrated by the sections of the public for its stance against perceived intrusions of AI into sensitive spaces. Consumer sentiment is appearing in the numbers as they side with Anthropic – in early March, Claude overtook ChatGPT as the most downloaded AI app on Apple’s US store following the announcement.
Seeing an opportunity to step into the gap left by Anthropic, OpenAI (ChatGPT) has stepped into the gap left by Anthropic. Messages written in chalk outside their San Francisco offices are conveying the opposite sentiment to what Anthropic has received. The scrawlings raised the very important question of “where are your redlines” and “What are the safeguards”.
The broader question this raises (and one that companies, countries, investors and markets have to consider), specifically of how much say private companies should have over how their technology is used in warfare and whether such technology, no matter how advanced, should ever replace human intervention in these processes — is unlikely to be resolved quickly and will be one to watch as AI becomes increasingly embedded in military operations globally.
This is just one example of the multitude of commercial, ethical, social, environmental, political and technological challenges that AI presents. All these concerns will be reflected in how we use AI and by extension, how much value is attributed to these companies and that last point is how it will affect most investor’s portfolios. The questions are numerous and nuanced, but the implications for investors are very real.
What history tells us
It is natural to feel unsettled when geopolitical events make headlines of this magnitude. But it is worth remembering that markets have weathered shocks such as wars as well as new technological advancements such as AI — and have recovered over time.
What this means for you
For investors, the temptation during moments like this is to do something — to dramatically shift asset allocations, reduce exposure to risk, or move to cash. History consistently shows this is rarely the right call.
While market volatility, especially when it involves wars, is uncomfortable – these events are a normal part of investing in global markets. Well-diversified portfolios are designed to manage these kinds of waves, and it may be worth reviewing how well positioned your own portfolio is to handle volatility if only to provide peace of mind.
As Austrian psychotherapist Viktor Frankl reminds us: “Between stimulus and response there is a space. In that space is our power to choose our response.” The investors who tend to come out ahead are not those who time the market perfectly, but those who remain patient, stay diversified, and resist the urge to react to every headline.
If you have questions about how your portfolio is positioned or simply want to talk through what this means for your specific situation, please don't hesitate to get in touch with your adviser.
The information contained in this publication is intended for general guidance and information only. It has not been personally prepared for you. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult with us before making any investment decision. Historical market performance may not be indicative of future market performance.