Market snapshot: a tumultuous quarter for global stock markets 

As a tumultuous first quarter draws to a close, hopes of an immediate ceasefire still seem forlorn as the warring parties continue to send out contradictory signals.

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Oil prices continue to edge higher although at a more limited pace, while investors remain rattled by the potential implications of a conflict which is beginning to be described in terms of months rather than weeks. The choking of supplies through the Strait of Hormuz remains a central sticking point, where Iran is fully aware of its stranglehold in the area and is defending any attempts to enable the resumption of normal trade.

Federal Reserve Chair Jerome Powell has said that inflation expectations were “well anchored” beyond the short term, although he inevitably conceded that the central bank could “eventually” face the question of the next move given the current economic effects. 

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In any event, the likelihood of interest rates remaining on hold for the time being has weighed heavily on investor sentiment and on smaller companies in particular which rely on borrowing to grow their businesses, with the Russell 2000 index having dropped by 9% over the last month. In the meantime, the benchmark S&P500 continued to edge towards correction territory from its recent high and is now down by 7.3% in the year so far, with the Dow Jones and Nasdaq having fallen by 5.9% and 10.5% respectively. 

The latest reading on inflation in Germany yesterday and today’s UK report on shop price inflation, both point to an inflation shock already feeding through into prices and supply chains, even if the impact is mostly limited to energy as opposed to broader pressure. Across Europe, the general reliance on imported energy has left the area at the mercy of spiralling prices and, as with the situation for investors as a whole, an extended conflict will exacerbate financial tightening.

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The latest GDP reading in the UK showed annual growth of 1.3% for the year as a whole, although any progress was constrained by growth of just 0.1% in the last two quarters. With the OECD warning that the UK would face the biggest hit from trade disruption in the Middle East, and with higher for longer interest rates likely given the inflationary pressure of rising energy prices, the immediate outlook remains tepid at best.

Since the outbreak of hostilities at the end of February, housebuilding stocks dominate the losers board for the two main indices, with mortgage availability and affordability concerns rising back to the surface. Alongside the services sector, construction has stagnated. In the FTSE100, Barratt Redrow (LSE:BTRW) and Persimmon (LSE:PSN) have both fallen by 30%, while in the FTSE250 Vistry Group (LSE:VTY) and Bellway (LSE:BWY) have lost 52% and 35% respectively.

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The double whammy of the bleak outlook for the housebuilding sector and the domestic economy as a whole has weighed most heavily on the FTSE250 which, after a sprightly start to the year given renewed interest in the UK as an investment destination, is now trailing by 6.5% in the year to date.

The primary index has fared rather better, although its 2% gain so far in 2026 leaves the FTSE100 more than 7% lower than the record levels achieved at the end of February. Another highly cautious but positive open suggests that the index remains the source of some solace for investors, although until the shackles of the conflict are removed, a sustainable recovery remains off the table.