Global Markets Between Meetings

March gave us some brief respite from discussions around a potential AI bubble. Instead, markets were dominated by the conflict in Iran and its potential consequences. The key unknown remains how long the Strait of Hormuz will stay closed. If it reopens quickly, oil prices are likely to fall, the drag on global GDP should ease, and central banks may be able to resume rate-cutting cycles. However, a prolonged closure would likely lead to sustained higher oil prices, renewed inflationary pressure, and weakness across both equity and bond markets.

Since the US and Israel launched their attack on Iran, markets have reacted negatively in several areas. The most notable move has been in oil prices. Having traded in a relatively stable range of $60–$70 over the past 12 months, oil spiked to a high of $120 before retracing to around $80. As of writing, prices have climbed back above $100. This volatility reflects the uncertain nature of the conflict, one which seems to change daily.

Gold, which might typically be expected to perform well during periods of uncertainty, has instead fallen by around 15% since the conflict began. While gold is traditionally viewed as a safe haven asset, this decline may reflect the strong rally it experienced in previous months. During periods of market stress, investors often seek liquidity, and with gold now more widely held, this selling pressure has had a more pronounced impact.

Equity markets have also come under pressure, although performance has varied by region. The extent of the sell-off is closely linked to each economy’s vulnerability to an energy price shock. The US, as the world’s largest oil producer, has shown relative resilience with the tech-heavy NASDAQ outperforming the broader S&P 500, suggesting a preference for asset-light businesses which rely less on oil. The UK has fared somewhat worse, though its exposure to oil stocks has provided some support. The weakest performers have been Japan and Europe, which rely more heavily on energy imports from the Middle East.

As in 2022, equities and bonds have sold off simultaneously, largely due to rising inflation concerns. Bonds, with their fixed income streams, become less attractive in an environment of higher inflation and interest rates. Following the initial escalation, the US 10-year Treasury yield rose from just below 4% to nearly 4.5%, before settling back to around 4.25% (yields move inversely to prices). UK gilt yields have followed a similar pattern.

Another notable change has been the strengthening of the US dollar. The broader trend in recent years has pointed towards a weaker dollar, as central banks diversify away from dollar-denominated assets. However, since the onset of the conflict, the dollar has rallied. Unlike gold, it has behaved more consistently as a safe-haven asset. That said, we do not view this as a reversal of the longer-term trend towards dollar weakness, and we have therefore maintained a degree of sterling hedging in our portfolios.

Changes to Model Portfolios and Seven Rivers Funds

In our update last month, we noted that we had made no portfolio changes directly linked to the conflict. We’ve still made no large changes but have taken some marginal steps to reduce risk. We have not made any significant changes to geographic views but at the higher end of the risk spectrum we have added to emerging markets and Japan, where we continue to see attractive long-term characteristics. The recent pullback related to the Iran conflict may present a compelling entry point.

As it has become clearer that the conflict may persist, we have modestly reduced interest rate sensitivity, reflecting ongoing uncertainty around inflation. This change has so far proved beneficial, with our increased exposure to lower-risk fixed income funds protecting as expected.

Within alternatives, we have undertaken a small degree of de-risking. We reduced infrastructure exposure, given its more market-sensitive nature, and increased allocations to lower-risk absolute return strategies. In equities, we exited a small property position in favour of areas we believe are more resilient in an inflationary environment. This included increasing exposure to insurance, healthcare, and a global growth fund that has held up well during the March sell-off.

Given the unpredictable and quickly changing nature of the conflict, we don’t believe it’s the right time to make large changes or attempt to forecast specific outcomes. Instead, we believe maintaining diversification, while making incremental adjustments to manage risk, remains the most sensible course of action.

Disclaimers

The content is intended for retail investors only, and for marketing and information purposes only. It is not an offer or solicitation to buy or sell any security, nor does it constitute investment, accounting, legal, or tax advice. You should not rely on this document as such – you should seek advice from your professional advisers.

The information is obtained from third party sources we believe reliable, but accuracy and completeness are not guaranteed, and opinions may change without notice.

Past performance and forecasts are not reliable indicators of future results. Investment values and income can fall as well as rise and you may get back less than you originally invested. Currency movements may also affect returns.

We accept no responsibility or liability for any loss arising from the use of this information. We and any connected parties may act upon information referred to herein before this document is published.

IC meeting date 30^th March 2026. The information and commentary contained in this document is based on views as at 7^th April 2026 and may be subject to change.