The latest economic news and market highlights from the UK and abroad.
This week's headlines:
- Trump postpones Iranian infrastructure attacks (again) – citing constructive talks (which Iran denies), Trump has issued a second 10-day extension to his threat to “destroy” Iranian power infrastructure.
- UK inflation steadies at 3% – the annual inflation rate remained unchanged in February, as prices rose across housing, utilities and clothing.
- European confidence falls – Euro Area consumer confidence fell four points in March versus a month prior, as energy prices rise and further economic concerns over the current Middle East conflict grow.
- UK faces big hit from Iran war – a new Organisation for Economic Co-operation and Development (OECD) report warns that the UK faces the biggest hit among G7 economics, with weaker near-term growth and rising inflation expectations.
- US economy activity falls – the composite Purchasing Managers’ Index (PMI) fell to 51.4 in March, signalling slowing growth in the economy and inching closer to contraction territory. The slowdown was led by falls in services, while manufacturing proved more resilient.
What this means for financial advisers and clients
The ongoing Iran conflict remains the top concern for investors as the war enters its fourth week, with no clear signs of de-escalation. We’ve seen no let-up in volatility either, as equity and bond markets swing up and down as investors look to assess how long the fighting will continue, and how long the region will take to heal and repair even after this is over. From an economic perspective, the numbers out this week show the conflict feeding through into falling consumer sentiment, lower economic activity and higher inflation, alongside the growing threat of global interest rates rises.
Chart of the week - the changing direction of inflation
Source: Bloomberg: Office for National Statistics, Bank of England
Why’s this worth sharing?
After peaking earlier in 2025, UK inflation began to gradually fall into Q4 last year. With the Bank of England (BoE) expecting a return to their 2% target by the second half of 2026. This in turn fed into market expectations of multiple interest rates cuts this year.
However, many of these assumptions were thrown out the window when the Iran–US/Israel conflict began in March. Since then, expectations of rate cuts have all but dissolved. Instead, the uncertainty this continues to cause, combined with restricted flows of oil and fertiliser, has pushed up oil and food prices, increasing the likelihood of further inflationary pressure and potentially even rate hikes. Such a shift could spell further trouble for both equity and bond markets.
This is illustrated above by the BoE’s latest forecast, surging back up to around 3.5% later in the year. This isn’t just a UK problem. Markets are also anticipating pressure on inflation in Europe, while the hopes of cuts in the US are starting to fade.
How are we positioned for current macro conditions?
Our core solutions have retained their overweight position in alternatives, which includes exposure to asset cases such as commodities and infrastructure. This has proved very supportive, with our diversified alternatives allocation one of the few areas of the market doing well this month, helping cushion wider equity and bond losses.
We’ve also shifted a portion of our Government Bond allocation into short-duration bonds which are less sensitive to changes in interest rates and should provide better protection if rates rise. With yield curves relatively flat at the moment, this involves giving up very little yield. While this switch wasn’t a direct response to the current conflict, it has proved very timely.
Despite the current market turmoil, the diversified nature of our asset allocation means we’re well-equipped to deal with a range of market conditions, good or bad. For now, we continue to monitor all developments closely while remining focused on the delivering long-term success for all investors.
Dive deeper
For a more in-depth look at the current conflict and how we’re positioned, read: The war in Iran: an update on markets and our investment solutions, written by Investment Director, Jasper Thornton-Boelman.
The Markets
FTSE supported by oil and gas
After a poor couple of weeks, the FTSE 100 managed to stay positive, buoyed by its significant allocation to the oil and gas sector. However, the more domestically focused FTSE 250 fell.
US tech-led sell-off
Both the S&P500 and NASDAQ sank this week, as Iran uncertainty combined with tech jitters -following a court ruling against Meta and concerns over demand at Google. In dollar terms, the NASDAQ breached correction territory, having fallen over 10% from its latest all-time high.
Inflation concerns weigh on emerging markets
Continued concerns over restricted oil supplies and rising food prices increase the threat of inflation and mean more central banks in the region are considering raising interest rates, factors which weigh heavily on equity markets
Commodity volatility continues
Oil prices fell over 1.50% this week after Trump extended the pause on strikes against Iranian power infrastructure, reducing the chances of the war expanding further into the Middle East. Although Brent crude remains up over 75% year-to-date. Despite its role as a safe haven asset, gold prices also ended lower on fears of rising interest rates.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | 0.67% | 1.35% |
| FTSE 250 | -0.12% | -4.64% |
| S&P 500 | -0.80% | -4.48% |
| NASDAQ | -1.65% | -5.73% |
| FTSE Developed Europe Ex-UK | 1.12% | -3.60% |
| FTSE Emerging Markets | -0.30% | 0.20% |
| FTSE Japan | 0.22% | 5.55% |
| Brent Crude | -1.78% | 76% |
| Gold Spot | -1.32% | 2.66% |
| UK 10yr Gilt yield | +12bps | +55bps |
| US 10yr Treasury yield | +16 bps | +27bps |
Source: Goldprice.org, exchangerates.org.uk, investing.com and finance.yahoo.com. GBP returns as at close of business on Thursday 26th March 2026.
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
