Introduction
At the end of February we were talking about the FTSE 100 edging towards 11,000 with rumblings of a possible energy crisis clouding the horizon as news of the bombing of Iran broke.
The 45th and 47th President of the United States gave us plenty more to talk about by the end of March.
Markets were volatile, reacting to the slightest bit of news, positive or negative. Social media posts from the President and the White House were enough to shift global indices. In this environment, media speculation becomes frenzied and unreliable, with interest rate cuts being predicted one day, and hikes the next. Sometimes it's better to switch off the news.
The defining tension for central banks — from the Bank of England to the Federal Reserve to the ECB — was the same: how to respond to an energy-driven inflation surge without stifling already-fragile growth. All of these three central banks held rates steady in March, but the trajectory for rate cuts that had seemed clear just weeks earlier now looks far more uncertain. A 'hold and see' approach is their position.
As we've learned in the past, it could all change again very quickly.
Many of the topics discussed under one region equally apply to other regions. The impact on nitrogen fertiliser, is one such issue, with longer term implications for crop yields and food prices.
As we approach the one year anniversary of President Trump's 'Liberation Day' it is another event with global implications, and one which rewards patience and perseverance.
United States
President Trump rarely leaves the headline news. This year alone has seen the removal of the Venezuelan President, trade tariffs deemed illegal, ongoing battles with the Fed and ongoing speculation about 'the Epstein files'. The 28th February attack on Iran has now taken control of the 24 hour news cycle in much the same way that trade tariffs dominated last Easter's news.
The effective closure of the Strait of Hormuz — through which around 20% of the world's oil and LNG passes — sent shockwaves through energy, equity and bond markets worldwide. By mid-March, Brent crude had surged past $100 per barrel for the first time since 2022, ultimately peaking near $120 as Iran launched retaliatory strikes across Gulf infrastructure. It was trading at around $112 per barrel at the end of March, but hovered around and occasionally below $100 per barrel on 1st April. European natural gas prices surged 70% over the course of the month.
By the final days of the month, markets stabilised somewhat after President Trump announced on 23rd March a pause in military action to allow for renewed talks with Iran. That announcement itself generated controversy after a Financial Times investigation revealed that $580 million of bets on falling oil prices had been placed just 15 minutes before Trump published his statement. As March ended, the situation remained fluid and unresolved.
The Federal Reserve (Fed) held rates steady at its March 17-18th meeting, voting 11-1 to keep rate at 3.5%-3.75%. The decision was widely anticipated, but the meeting was dominated by questions about the Iran war's economic consequences. Chair Jerome Powell acknowledged the uncertainty clearly, describing the conflict as a potential stagflationary shock — simultaneously pushing inflation up and growth down. He was careful, however, to note: "I would reserve the term stagflation for a much more serious set of circumstances. That is not the situation we're in."
The Fed's March projections pencilled in one rate cut in 2026, down from two expected before the conflict. GDP growth was revised up slightly to 2.4% for 2026, and both headline and core PCE inflation projections were raised to 2.7%. Powell said: "The forecast is that we will be making progress on inflation, but not as much as we hoped. The rate forecast is conditional on the performance of the economy, so if we don't see that progress, then you won't see the rate cut." The next Fed meeting in late April is technically Powell's last as chair, adding a further layer of institutional uncertainty as Kevin Warsh's confirmation process moves forward.
As a footnote to all this, U.S. Attorney Jeanine Pirro subpoenaed Jerome Powell for evidence regarding the Fed’s multibillion-dollar headquarters renovation. Powell resisted the subpoena, and a judge has now sided with Powell on the issue, rejecting the subpoenas and agreeing that the effort was simply to pressure Powell to cut rates. Pirro is appealing the decision.
The economic data has deteriorated alongside the geopolitical shock. US unemployment rose to 4.4% in February. Petrol prices crossed $4 per gallon nationally for the first time since late 2023, with California seeing prices above $5. Some commentators have described the conflict as a stagflationary shock, while Goldman Sachs warned that if oil prices remain elevated through year-end, CPI inflation could reach 3%.
The tariff situation evolved further during March. The Supreme Court's IEEPA ruling from February prompted the administration to invoke Section 122 of the Trade Act of 1974, which allows the president to impose tariffs of up to 15% for 150 days without Congressional approval. These tariffs are now set to expire on 24th July 2026 unless extended by Congress. With mid-term elections approaching and polls showing rising voter opposition to inflationary import costs, the politics around any extension is far from straightforward.
US equity markets weakened materially through March. The S&P 500 fell from 6,816 on 3rd March to around 6,477 by 27th March, a decline of around 5%. A brief recovery followed Trump's 23rd March ceasefire statement before retreating again as Iran's foreign minister dismissed reports of direct talks. The long-anticipated Trump-Xi summit, scheduled for 31st March to 2nd April in Beijing, was postponed by Washington to 14th to 15th May, removing a key near-term catalyst for stability in US-China trade relations.
Aluminium prices surged to a four-year high after Iranian airstrikes on Gulf producers raised fears of supply disruption. Helium supplies have also been affected, as Qatar produces approximately 30% of global supply and infrastructure at Ras Laffan was damaged, adding a further dimension to supply chain pressures in the tech sector.
UK
For the UK, the energy shock arrived at the worst possible moment. Chancellor Rachel Reeves delivered her Spring Statement on 3rd March against this turbulent backdrop, as the Office for Budget Responsibility acknowledged that the conflict could have very significant impacts on both the global and UK economies.
Energy prices for consumers are set to fall in the short term, due to a 7% reduction in the price cap. However, immediate increases to Council Tax, water bills and over time food costs, as global energy costs rise and costs ripple through many sectors, are causing significant concern and political pressure to act.
The FTSE 100 had reached its all-time closing high of 10,910.55 on 27th February — a record that now appears likely to stand for a little longer than expected. By 23rd March it had fallen to 9,894, down 7% over the month. It briefly recovered above 10,100 following Trump's ceasefire statement before falling back to close at 9,967 on 27th March. It closed the month at 10,176. BP and Shell have been standout performers within the index, benefiting from higher oil prices, while banking stocks have weakened and travel and leisure names have lagged. UK consumer confidence plummeted to its lowest level since the end of 2022.
The Bank of England held its base rate at 3.75% at its March meeting on 19th March, in a unanimous 9-0 vote — the first unanimous decision since September 2021. The decision had been expected, but the context had changed completely from the February meeting. Markets that had previously priced in rate cuts by April or May were, by late March, pricing in the possibility of hikes later in the year as higher energy prices threatened to push CPI to between 3% and 3.5% over the next few quarters, according to the Bank's own preliminary estimates.
Diesel prices hit their highest level since December 2022 on Monday 30th March, hitting181.2p per litre. This is a 27% rise since the start of the US-Israel bombing of Iran. During the same period the average petrol price reached 152p per litre, a rise of 14%. Business energy bills rose materially for electricity and gas. The government held emergency COBRA meetings to assess interventions. There has been a promise of a means tested energy allowance in the Autumn if required, and not the same level of intervention seen in some other countries. Political pressure is mounting, with the planned increase in fuel duty from September under particular scrutiny.
London property prices declined for a sixth consecutive month in January, and mortgage deals were being pulled by lenders as inflation expectations shifted rapidly. When considering fixed rates, mortgage lenders base their decisions what they expect to interest rates in the future, rather than where rates are now. So the Bank of England holding rates in March is unlikely to prevent an increase in fixed rates on mortgages going forward, whilst this level of uncertainty persists.
UK inflation stood at 3% in February — a figure that does not yet reflect the energy shock. The Bank of England now estimates CPI is likely to be between 3% and 3.5% over the next couple of quarters due to higher energy prices. Governor Andrew Bailey cautioned against assuming the BoE would raise rates, but the data dependency of future decisions is clear and the next meeting in late April will be closely watched.
Europe
Europe's economic momentum, which had appeared genuinely encouraging at the start of 2026, has also been derailed by the energy shock. The Eurozone Composite PMI had reached 51.9 in February, its best reading in some time. That was before 28th February.
By late March, a key business activity index indicated stagnation, with input costs rising at their fastest pace in three years. The OECD cut its eurozone growth forecast by 0.4 percentage points to 0.8% for 2026. The European Central Bank (ECB) held its main refinancing rate at 2.15% at its March 19th meeting, in a hawkish-interpreted decision. ECB President Christine Lagarde revised headline inflation projections to 2.6% for 2026, 2% in 2027 and 2.1% in 2028, citing the energy shock directly. Growth forecasts were cut to 0.9% for 2026.
The ECB's published projections offered three scenarios: a baseline (oil at $90/bbl in Q2 2026), an adverse scenario (oil near $120/bbl, gas near 90 euros/MWh) and a severe scenario (oil approaching $150/bbl). In the adverse scenario, Eurozone growth could be 0.3 percentage points lower than baseline in 2026 and inflation could breach 4%. Lagarde stated the bank would 'do everything necessary' to keep inflation under control, drawing a direct parallel to the ECB's actions during the 2022 crisis.
European natural gas prices surged 70% in March 2026. At ECB decision day on 19th March, Dutch TTF, which is seen as a Europe-wide natural gas price benchmark, was trading at its highest level in more than three years. The context makes this particularly alarming. European gas storage entered the critical summer refill season from a depleted position following a harsh winter. Infrastructure damage at Ras Laffan Industrial City in Qatar, which the IEA reported had taken the world's largest LNG liquefaction facility offline since 2nd March. This transformed what might have been a temporary disruption into a longer-term structural deficit. Since Qatar produces approximately 20% of global LNG, the implications extend well beyond a short-term price spike.
European equity markets fell across the continent. Germany's harmonised inflation measure jumped to 2.8% in March from 2.0% in February, driven by energy prices rising 7.2% year-on-year. The fertiliser market has also been affected: urea prices rose more than 40% since mid-February, given natural gas is the primary feedstock for nitrogen fertilisers, raising concerns about agricultural costs and crop yields into 2027.
France continues to grapple with its fiscal position. The invocation of Article 49.3 to pass the 2026 budget without a parliamentary vote required abandoning most spending reduction ambitions, and France's deficit relative to GDP is unlikely to narrow meaningfully this year. Germany's fiscal expansion remains a genuine medium-term positive, but its near-term benefits are being offset by the energy shock.
Far East
China opened March by holding its annual Two Sessions meetings, at which Premier Li Qiang formally set a GDP growth target of 4.5% to 5% for 2026 — the slowest projected growth since early in the 1990s. The lowered target reflected the combined headwinds already present before the conflict: weak domestic demand, the ongoing property sector adjustment, and trade tensions. The 15th Five-Year Plan, covering 2026-2030, was also outlined at the meetings, setting out China's strategic vision with an AI-driven industrial modernisation agenda at its core.
China faces particular exposure through its energy imports. Gulf countries have cut total oil production by more than 11 million barrels per day as the Strait of Hormuz has ground to a halt. China holds significant strategic oil reserves, providing some cushion, but sustained disruption will ultimately squeeze production costs for steel, chemicals and electronics, weakening export competitiveness at a moment of intense trade friction with the US.
The postponement of the Trump-Xi summit, scheduled for 31st March to 2nd April in Beijing, is a meaningful setback. The meeting had been viewed as a key indicator of whether last year's US-China trade truce would hold. Its deferral removes a key near-term catalyst for confidence in trade relations at precisely the wrong moment. It is hoped that the new date for the Summit in May will bring positive news.
Japan and South Korea are acutely exposed. Japan imports most of its energy supply and relies on the Strait of Hormuz for 70% of its total oil imports. Japan announced the release of approximately 80 million barrels from its national reserves starting 18th March — part of the IEA-coordinated global emergency release. South Korea activated a 100 trillion won (approximately $68 billion) market stabilisation programme. Japan's Cabinet Office warned that a sustained 10% increase in crude oil prices could boost consumer inflation by up to 0.3 percentage points over about a year, describing the risk as lasting rather than transitory.
Emerging Markets
The conflict has created a sharp and immediate divergence across emerging markets. Commodity exporters have benefited from soaring energy and metals prices, while energy importers — particularly across South and Southeast Asia — face intensifying pressure on current accounts, inflation and currency stability. The IEA noted that approximately 84% of crude oil and 83% of LNG passing through the Strait of Hormuz in 2024 was bound for Asian markets, making the region's exposure structural rather than incidental.
India faces a particularly complex position. Emergency powers were invoked to redirect LPG supplies from industrial users to households as domestic supplies tightened. The Indian government spends significant sums on energy, fertiliser and food subsidies which could all come under pressure with an energy crisis, widening the fiscal deficit at a difficult moment. India faces secondary tariff threats from the US of up to 25% on goods if it purchases Iranian crude outside the temporary sanctions waiver.
Across Southeast Asia, governments responded with emergency measures. Thailand told state agencies to work from home to curb fuel demand. Thailand's Prime Minister has even urged people to use the stairs rather than elevators. Bangladesh, which is reliant on imports for approximately 95% of its energy needs, imposed fuel caps, closed universities, rationed cooking gas and stationed troops at oil depots. The Philippines declared an energy emergency and announced a four-day work week for government officers. Pakistan deployed warships to escort merchant vessels in the Middle East. Nepal began rationing cooking gas.
Latin American commodity exporters have had a good 2026 prior to this latest crisis. Brazil and Peru continue to attract investor interest through their metals and agricultural exposure, with commodity prices elevated by the same energy shock that is hurting importers. However, the OECD cautioned that rising fertiliser costs — urea up more than 40% — could affect crop yields and secondary food inflation by 2027.
Summary
March 2026 was been defined by a single event: the consequences of the US-Israeli strikes on Iran and the effective closure of the Strait of Hormuz. Brent crude traded within a whisker of $120 per barrel before easing to around $92 at the time of the IEA's Oil Market Report on 12th March — still up $20 per barrel for the month. European natural gas supply was reduced by around 20% due to the situation. On 11th March, the IEA coordinated the largest emergency oil release in history — 400 million barrels from 32 nations — a figure that analysts estimated would cover only approximately 20 days of normal Hormuz flows. More than double the previous record release of 182.7 million barrels, set following Russia's invasion of Ukraine in 2022.
As the month ended, President Trump's 23rd March pause announcement briefly calmed markets, before Iran's dismissal of ceasefire reports reversed that move. The fundamental question — whether the Strait of Hormuz will reopen and when — remains unanswered. Until it does, every economic forecast is conditional.
For investors, the core principle that has served well throughout the volatility of recent years has not changed. Short-term shocks — however dramatic — have consistently rewarded those who maintained a long-term perspective and resisted the urge to react. The range of outcomes from here is unusually wide, but so too are the potential opportunities for those positioned to benefit once calm returns.
And finally...
Why do we measure crude oil by the barrel?
Since medieval times many types of commodity were measured by the barrel for convenience. There was a lack of easy and obvious alternative ways to measure them, and it was perfect for transportation.
Standardisation for oil barrels came in the late 19th century when the US oil industry defined it as the equivalent of 42 ‘wine gallons’. Wine gallons as a term of measurement had been in use since Richard III's time. By 1824, Britain had unfortunately already defined a water gallon as 20% larger than a wine gallon so had to use the term 'US gallon' for the oil gallon, and 'imperial gallon' for water.
In addition, the volume of a liquid depends on its temperature, so a barrel of oil is further defined as one which is filled at exactly 15.6°C and one atmosphere of pressure.
Why this hasn't changed to something a little easier in modern times is harder to answer, but the habit has persisted as we can see today.
Sources:
https://www.cnbc.com/2026/03/19/ecb-boe-swiss-national-bank-riksbank-interest-rate-decisions.html
https://www.iea.org/topics/the-middle-east-and-global-energy-markets
https://www.federalreserve.gov/newsevents/pressreleases/monetary20260318a.htm
https://www.cnn.com/2026/03/18/economy/fed-march-rates-decision
https://www.cnn.com/2026/03/18/economy/fed-march-rates-decision
https://www.cnbc.com/2026/03/18/fed-interest-rate-decision-march-2026.html
https://tradingeconomics.com/united-states/unemployment-rate
https://www.cbsnews.com/news/gas-prices-hit-4-a-gallon-iran-war-highest-since-2022/
https://fortune.com/2026/03/12/recession-stagflation-oil-iran-trump-deutsche-oxford-economics/
https://www.globalbankingandfinance.com/goldman-sachs-flags-upside-risks-oil-prices-near-term-2027/
https://www.cnbc.com/2026/03/18/fed-interest-rate-decision-march-2026.html
https://commonslibrary.parliament.uk/research-briefings/cbp-10495/
https://www.londonstockexchange.com/indices/ftse-100?trkcode=lsehomeftse
https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2026/march-2026
https://commonslibrary.parliament.uk/research-briefings/sn02802/
https://economic-research.bnpparibas.com/html/en-US/EcoNews-30-March-2026-3/30/2026,53332#:~:text=The%20OECD%20has%20slightly%20downgraded%20its%20growth%20forecasts,the%20UK%20by%200.5%20percentage%20points%20%28to%200.7%25%29.
https://www.ecb.europa.eu/press/projections/html/index.en.html
https://www.iea.org/topics/the-middle-east-and-global-energy-markets
https://www.fxstreet.com/news/lng-qatar-strike-heightens-global-gas-risk-ing-202603190932
https://invezz.com/news/2026/03/30/german-inflation-hits-2-8-in-march-matching-forecasts/
https://www.cnbc.com/2026/03/05/china-gdp-two-sessions-.html
https://apcoworldwide.com/blog/chinas-2026-two-sessions-6-key-takeaways/
https://www.iea.org/topics/the-middle-east-and-global-energy-markets
https://apnews.com/article/middle-east-wars-energy-asia-gas-oil-f22739369eb36ccaf87543459cfed320
https://www.cnbc.com/2026/03/11/iea-oil-reserves-crude-prices-iran-g7-energy.html
https://news.usni.org/2026/03/17/india-pakistan-escort-nationally-owned-tankers-in-gulf-of-oman
https://www.dimsumdaily.hk/nepal-to-ration-cooking-gas-due-to-shortage-fears/
https://www.iea.org/topics/the-middle-east-and-global-energy-markets