Main points:

Markets took a large hit when war broke out in Iran.

Most equity markets were relatively resilient over the quarter, reflecting a view that the war and its impact will be temporary.

Emerging markets, ex-US equities outperformed, as did smaller-cap stocks, reflecting a rotation from US large caps.

Fixed income returns were soft while real assets and alternatives performed well.

Markets delivered mixed performances in the March 2026 quarter. January and most of February were strong, but this was completely up-ended on 27 February when the United States and Israel launched a war on Iran. Oil prices rose dramatically as energy facilities in the Gulf region were attacked by Iran and as traffic in the Straits of Hormuz, which accounts for around 20% of global oil trade, was left high and dry. While most equity markets were down over the quarter, they have been fairly resilient to the ‘shock’. This partly reflects an expectation that the war will be short-lived, with trade flows from the Gulf region resuming in time. That is, the market is betting that the negative impact on economic growth and inflation will be temporary. At the time of writing (April 8th) this expectation appears to be validated given the announcement of a two-week ceasefire to negotiate a more lasting resolution and the fact that damage to oil and gas facilities in the Gulf region have been relatively modest, whilst flows from other regions have increased. But that said...