April Market Update

The period from early March to mid-April has marked a clear shift in market tone. After a strong start to the year, equity markets have given back much of their gains as geopolitics has reasserted itself as the dominant driver of short-term market direction. The escalation of tensions involving Iran - and more recently the risk of further disruption to the Strait of Hormuz - has introduced a renewed energy shock risk at a time when inflation was only just appearing under control. This has created a more fragile backdrop, where markets are reacting quickly to headlines rather than underlying fundamentals.

That said, it is important to separate sentiment from structure. While geopolitical events have triggered volatility, the underlying economic picture is more nuanced. Growth is slowing in parts of the global economy - most notably the US - but not collapsing. Corporate earnings expectations have softened but remain broadly resilient, and in key sectors, particularly technology, structural growth drivers continue to dominate.

Equities: Volatility returns, but leadership remains narrow

Global equity markets have been unsettled over the past six weeks. Much of the early 2026 rally has reversed, leaving major indices broadly flat year-to-date. The pattern has been characterised less by a broad-based sell-off and more by sharp rotations and heightened day-to-day volatility.

The US remains central to the story. There are increasing signs that economic momentum is cooling - weaker manufacturing data, softer labour market indicators, and a moderation in consumer spending. Markets have responded by becoming more sensitive to downside surprises, particularly given elevated valuations following last year’s gains.

However, the equity market is far from uniform. The technology sector - and AI-related companies in particular - continues to show strong earnings momentum and investor demand. Nvidia’s recent guidance reinforced the view that we are still in the early stages of a significant investment cycle in artificial intelligence infrastructure. This has helped support indices, but also highlights an ongoing concentration risk: a relatively small number of companies continue to drive a large proportion of market returns.

Outside the US, performance has been more mixed. European equities have been weighed down by both geopolitical proximity to the Iran situation and political developments, while Asian markets have shown sensitivity to global growth concerns and rising energy costs.

Geopolitics and markets: From background noise to front and centre

Geopolitical risk has moved from a secondary consideration to a primary market driver. The Iran conflict - and more specifically the threat to oil flows through the Strait of Hormuz - has been the key catalyst.

Markets are attempting to price a range of outcomes, from a contained disruption to a more prolonged supply shock. The difficulty is that these scenarios have very different implications for inflation, growth, and monetary policy. As a result, we’ve seen rapid repricing across asset classes in response to each new development.

Importantly, this type of uncertainty tends to create short-term volatility rather than long-term structural damage - unless it feeds through into sustained inflation or materially impacts global growth. That transmission mechanism, via energy prices, is what investors are now watching most closely.

Bonds: Caught between slowing growth and inflation risk

Bond markets have also struggled to find direction. Government bond yields have remained volatile, reflecting a tension between two competing forces: signs of economic slowdown (which would typically push yields lower) and the risk of renewed inflation (which pushes yields higher).

Central banks have responded with caution. The Federal Reserve, Bank of England and ECB have all held rates steady, signalling a “wait and see” approach. However, market expectations have shifted meaningfully. Earlier in the year, investors were pricing in rate cuts; now, there is growing recognition that further tightening cannot be ruled out if energy-driven inflation persists.

This leaves bonds in an unusual position. They are no longer providing the same degree of diversification benefit seen in previous downturns, at least in the short term, as both bonds and equities have been responding to the same inflation concerns.

Inflation: The “last mile” just became more complicated

Inflation data for March in both the UK and US appeared relatively stable, broadly in line with expectations. However, this stability reflects a period before the recent escalation in geopolitical tensions and energy prices.

The key issue is forward-looking. A sustained rise in oil prices - particularly if Brent remains at or above $100 - would feed through into transport, production, and ultimately consumer prices. This risks reversing some of the progress made over the past year and complicates the final phase of the inflation cycle.

Central banks are acutely aware of this risk. Unlike in earlier phases of the inflation surge, there is a clear reluctance to ease policy prematurely. This increases the likelihood that interest rates remain higher for longer than markets had previously anticipated.

Commodities: Oil back in focus

Among commodities, oil has been the standout mover. Prices have risen sharply in response to supply concerns linked to the Middle East, with Brent crude moving back above $100 per barrel.

This matters not just for energy markets, but for the broader economic outlook. Oil acts as both a tax on consumers and a cost pressure for businesses. Sustained higher prices could therefore weigh on growth while simultaneously pushing inflation higher - a challenging combination for policymakers and markets alike.

Other commodities have been less central to the current narrative, although there has been some renewed interest in traditional safe havens amid geopolitical uncertainty.

Bringing it together

The key takeaway from the past six weeks is that markets have transitioned from a relatively benign, growth-led environment to one dominated by uncertainty and cross-currents. Geopolitics, inflation, and monetary policy are now tightly intertwined, creating a more complex backdrop for investors.

However, this is not an environment without opportunity. Volatility often reveals where markets are over- or under-reacting, and the divergence between sectors - particularly within equities - continues to create meaningful dispersion in returns. For long-term investors, maintaining diversification and focusing on underlying fundamentals remains critical, particularly when short-term narratives are shifting as quickly as they are today.

Disclaimer: Any information contained within this article is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Journey accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.