Monthly Highlights:
- Global markets declined sharply in March as the Middle East conflict escalated, triggering a broad risk-off environment. Coordinated US-Israeli strikes on Iranian targets, which began in late February, raised concerns around energy supply and regional stability, pushing oil prices higher and leading to a global sell-off in shares and a repricing in bond markets. Market volatility increased as investors shifted focus from growth and earnings toward geopolitical risk and inflation pressures.
- Australian shares fell significantly over the month, with broad-based weakness across most sectors. Materials declined as bulk commodity prices softened, while information technology and real estate were pressured by higher interest rate expectations and ongoing global weakness in growth sectors. In contrast, energy surged on higher oil prices and utilities also rose, supported by their links to energy markets and more defensive earnings profile.
- International shares declined across most major regions amid heightened geopolitical tensions and rising energy prices. Europe and Asia were more heavily impacted, reflecting their greater exposure to higher energy costs, while the US proved relatively more resilient. Emerging markets also declined, reflecting higher oil prices, a stronger US dollar and more cautious investor sentiment. For Australian investors, the stronger US dollar helped cushion unhedged global share returns.
- Australian and global fixed interest markets declined, although they continued to provide relative support compared to shares during a period of market stress. Government bonds fell as higher oil prices added to inflation concerns, pushing yields higher and weighing on prices. Credit markets weakened as spreads widened, meaning investors demanded greater return to hold corporate bonds over government bonds, particularly in lower quality segments.
