📊Q1 Market Review 2026

As we close the first quarter of 2026, markets delivered a powerful reminder of how quickly the investment landscape can shift—from optimism at the start of the year to heightened uncertainty by quarter-end.

A strong start, followed by a global shock

Markets entered 2026 with momentum. Equity markets initially moved higher, supported by solid corporate earnings, enthusiasm around AI-driven productivity, and expectations for central bank rate cuts. However, this optimism proved short-lived.

By March, the escalation of conflict in the Middle East became the defining macro event of the quarter. The disruption of key energy supply routes—particularly the Strait of Hormuz which is crucial for global energy supply (roughly 20% of the world's total oil and liquefied natural gas (LNG) passes through daily)—triggered one of the most significant oil shocks in decades, driving energy prices sharply higher (and stocks lower) and introducing renewed inflation concerns.

As a result:

• Global equities pulled back after early gains, with most major regions finishing the quarter lower

• Volatility increased across asset classes

• Commodity markets—especially oil—were the standout performers

• Bond markets declined as yields rose on inflation fears and shifting rate expectations

Inflation and interest rate expectations reset

The surge in energy prices and persistent inflation pressures forced central banks into a more cautious stance. Investors began to question whether rates would remain “higher for longer,” with some regions even pricing in the possibility of additional rate hikes rather than cuts. 

This shift weighed on both equity valuations and fixed income returns, as higher yields translated into lower bond prices and tighter financial conditions.

The recent ceasefire: short-term relief, long-term uncertainty

In early April, markets reacted positively to the announcement of a conditional ceasefire in the Middle East conflict.

The immediate impact was notable:

• Oil prices fell sharply as supply concerns eased

• Global equities rallied, with major indices posting their strongest gains in months

• Market expectations for potential rate cuts modestly increased

However, this relief has proven fragile. Oil prices have already shown renewed volatility, and markets remain sensitive to headlines as the durability of the ceasefire is still uncertain. 

Importantly, even if the ceasefire holds, the economic effects of the conflict—particularly higher energy costs and supply disruptions—are expected to linger. Inflation may remain elevated, and global growth could face headwinds in the coming quarters. 

Key takeaways for investors

The first quarter reinforced several important investment principles:

• Geopolitics matters: Events in critical regions like the Middle East can quickly ripple through energy markets, inflation, and global growth

• Diversification remains essential: Different regions and asset classes responded very differently during the quarter

• Expect continued volatility: Markets are likely to remain sensitive to both geopolitical developments and central bank policy shifts

Looking ahead

While the ceasefire offers a potential path toward stabilization, uncertainty remains elevated. The direction of inflation, central bank policy, and energy markets will be key drivers as we move into the second quarter.

For long-term investors, periods like this—while uncomfortable—are not unusual. Staying disciplined, diversified, and focused on long-term objectives remains the most effective approach.

Information from Fidelity Investments, Morningstar, and BMO Global Asset Management

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This blog was prepared by Alison Cannell, for the benefit of Alison Cannell, Financial Advisor with Cannell Wealth Management Inc., a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this blog comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability.

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