Market headlines

Risk appetite rebounded sharply, reversing March weakness

Financial markets staged a strong recovery as easing geopolitical tensions and resilient Q1 earnings helped restore confidence, with global equities posting strong gains and leadership returning to growth-oriented sectors.

Energy remained central

Oil markets stayed highly sensitive to geopolitical developments, with prices elevated as supply disruption risks persisted, keeping the link between energy and inflation firmly in focus for investors.

Volatility eased, but markets remained macro driven

While market volatility normalised as tail risks were partially priced out, asset prices continued to be shaped by energy dynamics, inflation expectations and the anticipated policy response from central banks.

AI regained its position as the dominant market driver

The AI theme re-emerged as a key pillar of the rally, with mega-cap tech and the broader supply chain leading performance, supported by robust earnings, sustained capex and continued confidence in long-term structural growth.

The big topics

Middle East tensions drive markets

Geopolitics dominated throughout the month, with the US–Iran conflict repeatedly shifting sentiment.

Optimism around a temporary ceasefire sparked a strong risk-on rally, but the ceasefire proved fragile as negotiations stalled and disruption to shipping through the Strait of Hormuz persisted. Oil prices were highly volatile, falling sharply on hopes of de-escalation before rebounding above $100 as tensions resurfaced. This volatility fed directly into broader markets, driving moves in equities, bond yields, and inflation expectations. The key takeaway is that energy prices remain the primary transmission channel from geopolitics to financial markets, and investors remain exposed to changing headlines.

Energy shocks complicate the inflation outlook

Inflation dynamics became more complicated as energy prices stayed high.

US CPI showed a sharp monthly increase, driven largely by a surge in gasoline prices, highlighting how quickly supply shocks can filter through to headline inflation. While core inflation remained relatively contained, underlying pressures are still above central bank targets. This combination makes it difficult for policymakers to confidently signal further easing. Markets were forced to reassess how quickly inflation can moderate, particularly given the risk of prolonged energy disruptions. The result is a more uncertain policy backdrop.

Resilient but uneven growth picture emerges

Economic data suggested that global activity remains resilient, but with growing divergence.

In the US, strong retail sales, payrolls, and PMI data indicated that growth is holding up despite higher energy costs. However, these same indicators also pointed to rising input prices, exacerbating stagflation concerns. Europe presented a weaker picture, with PMIs slipping into contraction territory, reflecting greater sensitivity to energy costs. The UK stood out with relatively stronger activity data, although rising gilt yields highlighted ongoing fiscal and political concerns. Overall, the global economy appears to be absorbing the shock for now, but cracks are beginning to emerge beneath the surface.

Central bank expectations shift amid policy and political uncertainty

Interest rate expectations shifted meaningfully as markets reacted to both inflation data and political developments.

Earlier optimism around rate cuts was partially reversed as energy-driven inflation risks re-emerged. In Europe, markets even began to price the possibility of further tightening despite weakening growth, raising concerns about policy trade-offs. In the US, attention turned to leadership uncertainty at the Federal Reserve, with developments around the transition from Chair Powell to Kevin Warsh adding another layer of complexity. Together, these factors underscore how both economic data and political dynamics are shaping a more uncertain path for monetary policy.

Important information
The information in this article does not constitute advice or a recommendation and investment decisions should not be made on the basis of it. This article is for the information of the recipient only and should not be reproduced, copied or made available to others. The price of investments and the income from them may go down as well as up and neither is guaranteed. Investors may not get back the capital they invested. Past performance is not a reliable indicator of future results.

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Brooks Macdonald Group plc is registered in England No 04402058. Registered office: 40 Leadenhall Street, London, EC3A 2BJ.

The Monthly Edit – April 2026