When 2025 drew to a close, investors remained optimistic that markets could continue to trend upwards over the course of the year ahead.
However, the first quarter of 2026 has proved more volatile than many had imagined, with the war in the Middle East and continued tariff uncertainty causing fluctuations in the price of several asset classes. Inflation and interest rates also stagnated in many areas, rather than decreasing as some had predicted.
Keep reading for an in-depth view of global investment markets over January, February, and March of 2026.
UK
The OECD downgraded its UK GDP forecast to 0.7% in its Interim Report, published in March.
Indeed, after strong growth at the start of last year, over Q4 2025, the UK economy grew by just 0.1%.
What’s more, over Q1, the sharp increase in oil prices following the Iran war suggests that higher inflation is to be expected in the coming months.
As it stands, though, the Office for National Statistics (ONS) reports that the rate of inflation was 3% in both January and February, down from 3.4% in December.
The Bank of England (BoE) has an inflation target of 2%. In response to the economic climate and geopolitical conflict, the BoE held the base interest rate at 3.75% throughout Q1 after dropping it from 4% in December.
Meanwhile, UK equity markets felt the effects of the Iran war, with JP Morgan reporting that the UK FTSE All-Share posted a meagre 2.4% return in Q1.
Although this pales in comparison to its 24% return over the course of 2025, UK markets remain strong relative to other global indices – and short-term fluctuations are not usually worth losing sleep over. This is partially down to the FTSE All-Share’s slightly heavier weighting in commodities, such as oil. Plus, gold prices rose to a peak of nearly £3,900 an ounce in early March.
Europe
European markets were heavily disturbed by the conflict in the Middle East. As JP Morgan reports, the MSCI Europe fell 2.3% as oil and natural gas prices rocketed up, affecting the economic outlook in the region.
Eurostat predicts that eurozone inflation will have jumped from 1.9% in February to 2.5% in March, with energy being the biggest contributor at a predicted 4.9% rate of inflation. This could spell further cost-of-living concerns for European citizens and put the European Central Bank (ECB) under pressure to fix or increase its central rate of interest.
Meanwhile, growth projections for the region were downgraded by 0.3% for 2026 and 0.1% for 2027, as published by the ECB in March.
US
The US S&P 500 posted a 4.3% negative return in Q1. Before the conflict in Iran began, investors were already cautious around US holdings, with many fearing that large-cap technology stocks had become overinflated and were due a correction – JP Morgan says that US tech stocks saw a 23% decline between the start of the year and 27 February.
In March, investors then reacted to the US-Israeli invasion of Iran by restoring their confidence in the technology sector, while understandably being spooked by the uncertainty of the war.
Meanwhile, the US dollar weakened to a four-year low in January, the BBC reported, due to ongoing ambiguity over tariff decisions and tensions between Europe and Greenland, and the US. In March, the currency saw a temporary gain before falling again as central banks around the world, including the US Federal Reserve, prepared to hold interest rates rather than decreasing them as planned, Reuters says.
Trading Economics reports that US inflation remains at 2.4%, while GDP growth slowed to 0.7% in Q4 2025.
Asia
The MSCI Asia ex-Japan index saw a downswing in Q1, ending the quarter at -1.1%.
In part, this is due to the energy crisis that unfolded after the closure of the Strait of Hormuz – JP Morgan’s analysis states that “more than 80% of the oil and gas that flows through the Strait of Hormuz is destined for Asia”.
Despite this, some countries saw positive results, including India and Japan, with Indian markets posting the strongest quarter since 2018 thanks to a business boom, Forbes says.
The Japan TOPIX finished Q1 on a 3.6% return with technology stocks still leading the way, while inflation dropped to 1.3% in February, Trading Economics says – its lowest level since March 2022.
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