April 2026

UK

UK markets fell in March: Investor sentiment and market movements were dominated in March by unfolding developments in the Middle East as the conflict between the US and Iran intensified. During the month, the FTSE 100 Index dropped by 6.7%, while the FTSE 250 Index fell by 10.7%. Amid speculation over the prospect of interest rate increases – rather than the rate cuts anticipated by many investors before war broke out – the yield on the 10-year gilt breached 5%. The Bank of England left interest rates unchanged at 3.75% in March but confirmed that it “stands ready to act” to ensure inflation remains on track to meet its 2% target in the medium term. The annualised rate of inflation remained at 3% in February but is widely expected to have risen sharply in March in response to higher energy prices.

Inflation set to reach 4%? The Organisation for Economic Cooperation & Development (OECD) downgraded its forecast for UK economic growth this year from 1.2% to 0.7%, putting the UK second bottom amongst its G7 peers. The UK’s rate of inflation is now forecast to reach 4% this year, compared with the OECD’s previous prediction of 2.5%. This is the second-highest inflation forecast in the G7, surpassed only by the US at 4.2%. The OECD also cautioned that “adjustments” to monetary policy might be necessary if inflationary pressures broaden or if growth prospects weaken substantially. 

Consumers under pressure: a survey undertaken by the British Retail Consortium (BRC) and Opinium found that UK consumer expectations collapsed to their lowest level on record for both the state of the UK economy and personal financial situations. Elsewhere, GfK’s survey of consumer sentiment reported further deterioration and warned: “A ripple of fear is spreading … People simply do not feel the economy is robust enough to ride out the knock-on effects from the Middle East conflict.” According to the BRC, higher costs resulting from the conflict are already feeding into supply chains. 

Tax take set to reach post-war high: in the government’s Spring Statement, the Office for Budget Responsibility (OBR) cut its forecast  for UK economic growth in 2026 from 1.4% to 1.1% and predicted that taxes  would reach a post-war high of 38% of GDP by 2030-31, with personal taxes accounting for almost half that increase.

Global

Market volatility: the conflict in the Middle East, which began at the end of February, completed its first month. Markets seesawed; volatility increased sharply amid mixed messages   from President Trump; and energy prices soared following the near closure of the crucial Strait of Hormuz. While the Dow Jones Industrial Average Index fell by 5.4% during March, Germany’s Dax Index dropped by 10.3%, and Japan’s Nikkei 225 Index plummeted by 13.2%. 

Energy prices surged: the International Energy Agency warned that interruptions to flows through the Strait were “creating the largest supply disruption in the history of the global oil market” and announced that its members would release a record 400 million barrels of oil in a bid to mitigate challenges “unprecedented in scale”. Over March, the price of Brent crude oil climbed by 63.3%, ending the month at US$118.35 per barrel. During the first quarter of 2026, the oil price surged by more than 94%.

US growth revised down: US economic growth over the final three months of 2025 was adjusted down from 1.4% to just 0.7%, reflecting revisions to export activity, consumer and government spending, and investment. The annualised rate of inflation in the US remained at 2.4% in February but did not reflect the impact of the Middle East conflict. By the end of March, the price of gasoline in the US had breached US$4 per gallon for the first time since 2022. Federal Reserve (Fed) policymakers voted to maintain the key federal funds rate at a range of 3.5% to 3.75% and raised their year-end inflation forecast from 2.4% to 2.7%. Fed Chair Jerome Powell warned that the economic effects of the war “could be bigger, they could be smaller … we just don’t know.”

Interest rates on hold: alongside the Fed, the European Central Bank (ECB), the Bank of England, the Bank of Japan, the Swiss National Bank, the Bank of Canada, and the Swedish Riksbank all elected to leave their key interest rates unchanged. ECB President Christine Lagarde confirmed that policymakers were ready to tighten monetary policy if the Middle East war drives up inflationary pressures, saying: “We will not be paralysed by hesitation.” Meanwhile, the Reserve Bank of Australia opted to implement a quarter-point increase, taking its interest rate to 4.1%.