Three Charts in Three Minutes – Q1 2026

Source: Alpha Terminal, April 2026

The Iran-US war in March saw oil prices spike which sent inflation expectations soaring. This caused a dramatic recalibration in the path for interest rates (used to control inflation) which then has negative implications for both corporates and consumers.

Corporates that have debt see their interest payments increase, whilst consumers are less likely to spend/borrow and more likely to save. This chain of recalibration is what caused the market to sell off in March.

However, as we are getting all-too familiar with, Trump backed out of his threat that ‘a whole civilisation will die tonight’¹, a ceasefire was announced, oil prices drop and the market roared back. Just as we saw in April last year with Trump’s tariffs, cooler heads prevail.

¹ Trump condemned over threat that Iran’s ‘civilisation will die’ – BBC News

Source: Pantheon Macro, UK Economic Monitor, April 2026

We’re seeing a very similar spike in oil prices now, as we did at the start of the Russian invasion of Ukraine in 2022. One of the key differences between the two, however, is the weakness we are seeing in the labour market.

The chart above shows that unemployment in the UK is much higher going into the Iran war than the Ukraine war, and wage growth is falling instead of rising. If the labour market was tight, i.e. unemployment low, a short-term spike in inflation from oil prices would see wage growth surge as it did in 2022 as employees have the power to demand that their wages cover inflationary pressures.

In this instance though, with the labour market looser, i.e. unemployment on the rise, we likely won’t see that spike in wage growth leading to a second wave of inflation, but instead it could be deflationary over the mid-term as consumers have to swallow the inflationary spike, leaving them with less disposable income.

Source: JPMorgan Guide to the Markets, April 2026

Despite a whipsaw in both stock and bond prices, and the ongoing geopolitical situation, how have fundamentals actually shifted? Well, earnings, which are the long-term driver of share prices, retain their bullish estimates for the year, in fact, these have improved from the end of Feb – pre US-Iran war.

We are keeping an eye on energy prices and are aware these could impact profitability in some areas of the market more than others e.g. Japan which has a heavy bias to energy-reliant Industrials. However, we do not see GDP Growth around the world being materially impacted, inflation spikes should be short-lived and central banks won’t need to start hiking all of a sudden.

Whilst the global economy may be a little sluggish this year, and Trump will undoubtedly cause more bouts of volatility, we see nothing recessionary on the horizon and remind ourselves that it’s earnings that matter – and they continue to look positive.