Geopolitical tensions in the Middle East remain a key source of uncertainty for global financial markets as conflict involving the United States and Iran has continued into April. While a temporary ceasefire earlier in the month offered brief relief to markets, its fragile nature and subsequent breakdown have kept investors focused on the risk of renewed escalation. The region remains strategically important to the global economy, particularly due to its role in energy production and critical shipping corridors, and developments there continue to influence market sentiment across asset classes.

Recent market reactions have been most pronounced in energy markets. Concerns around disruptions to oil supplies and shipping through the Strait of Hormuz have pushed crude prices sharply higher and increased volatility across commodities. Elevated energy prices have renewed inflationary concerns at a time when central banks are attempting to balance moderating economic growth against price stability. As a result, interest rate expectations have moved in response to these pressures, contributing to increased volatility in equity and fixed income markets.

As the situation evolves, we are monitoring several key transmission channels through which geopolitical developments could affect markets. These include the durability of global energy supply, the impact of higher input costs on corporate margins and economic growth, and potential shifts in investor risk appetite. Importantly, while headlines around conflict and ceasefires have driven short term market movements, financial markets have also shown signs of adapting as investors increasingly distinguish between immediate disruption risks and longer term economic fundamentals.

From a portfolio perspective, we continue to believe that diversification across asset classes, sectors, and geographic regions remains essential in navigating periods of heightened uncertainty. History shows that while geopolitical events can lead to short term volatility, long term investment outcomes are driven primarily by economic growth, corporate earnings, and disciplined portfolio construction. We will remain vigilant in monitoring developments and assessing risks, while staying focused on long term objectives rather than reacting to short term market noise.

Global Index Performance

Indices	Month-to-date at March 31  2026	Year-to-dateat March 31 2026
Canadian Bonds1	-1.97%	0.23%
Canadian Large Cap Equities2	-4.32%	3.94%
U.S. Large Cap Equities3	-2.77%	-3.04%
Developed Market Equities4	-8.10%	0.67%
Emerging Market Equities5	-11.01%	1.71%

Source: FactSet as of April 10, 2026.

Fixed Income*

The Bank of Canada held its policy rate at 2.25% on March 18, reflecting a cautious, data-dependent stance. While policymakers acknowledged that rising energy prices tied to the Iran conflict could add to inflation pressures, they placed emphasis on broader economic headwinds, including slowing growth and ongoing trade uncertainty. In the United States, bond markets reflected a similar balance of risks, with the labour market remaining resilient but showing signs of moderation, supporting a more measured policy path from the Federal Reserve. Corporate bond issuance slowed after a strong start to the year, reflecting a more cautious stance by issuers amid macro uncertainty.

Equities* 

Canadian equities struggled in March despite strong gains in energy markets. Performance across the broader market was notably weaker, with most other sectors declining, particularly materials, as uncertainty around the macroeconomic outlook and rising interest rate expectations weighed on returns. This divergence underscored the lack of broad-based participation in Canadian equity returns. A similar pattern emerged in the United States, where equity markets declined and most sectors finished lower. Energy once again stood out as the clear outlier, while the rest of the market came under pressure as elevated oil prices intensified inflation concerns. Higher energy costs flowed through transportation, production, and consumer goods prices, reinforcing expectations for a more restrictive monetary policy environment and weighing on broader equity valuations. Further, international and emerging market equities declined during the month, underperforming due to many countries being net energy importers, which makes them more sensitive to oil price shocks. International and emerging market equities declined during the month, experiencing heightened weakness as tighter global financial conditions, currency pressures, and slowing global growth weighed on returns.

 

Market Outlook

Geopolitical risks have become more pronounced, with the conflict involving Iran disrupting global energy markets and contributing to increased volatility across asset classes. This supply shock has created a more challenging macroeconomic backdrop and complicated the policy outlook for central banks, as they navigate persistent price pressures alongside signs of moderating economic activity. Markets continue to adjust to this environment, with heightened sensitivity to incoming data and macro developments. In this context, diversification across regions and sectors remains critical, as narrow market leadership and elevated uncertainty can lead to continued volatility, reinforcing the importance of disciplined portfolio construction and a long-term investment approach.

*Data sourced from FactSet as of April 10, 2026. 

 

 

 

1. As measured by the FTSE Canada Bond Universe Index
2. As measured by the S&P/TSX Composite Total Return Index
3. As measured by the S&P 500 Total Return Index in CAD
4. As measured by the MSCI EAFE Total Return Index in CAD
5. As measured by the MSCI EM Total Return Index in CAD