General Economic Overview – Quarter 1 2026
At the beginning of March there was a change of strategy in the Middle East as the US and Israel decided to launch attacks on Iran. This news and its possible implications drowned out nearly everything else that happened in the quarter and much of the stock market momentum was lost, despite an encouraging start to the year. Initially it was hoped that the conflict would be short lived, but this proved optimistic – the four-year anniversary of the war in Ukraine in February highlights that the best laid plans don’t always deliver the expected results. The change in regime in Iran that was anticipated by the US President early in the conflict, has not materialised even though the Iranian leader and his close team were removed early on. Iran has continued to defy the might of the US and Israel and has involved other Middle East states and closed off the Strait of Hormuz, one of the key routes for global trade. The situation is difficult to predict, given that both sides are claiming victory without having achieved a meaningful peace. The White House is reluctant to back down without being able to declare some sort of victory, however pyrrhic, and Iran is prepared to fight on, ignoring the US rhetoric.
The Iran conflict is dominating macro discussions as it has both short- and long-term implications. The short-term effects are more obvious – the price of oil has surged alongside other real assets, with the exception of gold which has fallen in value, for reasons that are difficult to interpret. Volatility in equity and bond markets abounds, and sentiment is on a knife edge due to the regular statements from the White House and counter statements from Iran which cause markets to rise and fall on a regular basis. Longer term we should focus more on how the global economy resumes after the conflict is resolved. Inflation will be affected as oil price rises affect nearly all industries and consumers, and global trade and supply routes will take time to re-establish themselves which will hit growth estimates. It is likely that those regions which depend on external energy supplies, such as the UK and Europe, will be hit to a greater extent than those with more independence, such as the US. There may also be indirect influences, such as driving more interest in renewables to speed up the process of achieving energy independence. Diversification, a stalwart of investment advice over the years, has also been challenged as many offsetting risk strategies are corelating with traditional risk assets, leaving very few safe havens outside of cash. Longer term diversification still makes sense for investors who are unlikely to time market entry and exits with any accuracy.
The current message is one of ongoing uncertainty and the length of the conflict will determine which issues are the most significant longer term. Planning is difficult as markets are very volatile and susceptible to sentiment changing rapidly on the release of any information related to the conflict. We can only hope that the conflict is resolved sooner rather than later and confidence in the global economy is restored, thereby minimising the damage caused and avoiding a recession.
Please be aware that this material is for information purposes only and is supplied by Rayner Spencer Mills Research, an independent research consultancy. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are, unless otherwise stated, Rayner Spencer Mills Research own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. Neither Equium Wealth Management Limited or Rayner Spencer Mills Research accepts any legal responsibility or liability for any matter or opinion expressed in this material.