Market Review 7th April 2026

Everything you need to know, Simplified!

Summary

• Markets rebounded despite volatility, with equities and bonds both gaining as optimism around a potential ceasefire in the Middle East improved sentiment

• Price action remains reactive, with markets at times driven more by headlines and Truth Social than underlying fundamentals

• Beneath the surface, fundamentals are holding up, with resilient economic data and expanding corporate margins

• Sector leadership reflected the conflict, with previously pressured areas rebounding most strongly

• Focus this week centres on Donald Trump’s deadline on Iran and US inflation data, with escalation and high energy costs testing the balance between resilient fundamentals and geopolitical risk.

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Market Review

Markets rebound on strong fundamentals and hope for a ceasefire

In Dr. Seuss’ ‘If I Ran the Circus’, the ‘Zoom-a-Zoop’ troupe’s trapeze act is so chaotic that no one knows ‘who will catch which by the what and just where, or just when and just how in which part of the air’. It has been an apt parable for markets since the conflict in the Middle East began six weeks ago. The unpredictable rotations have been uncomfortable, but once we cut through the noise there is room for optimism. Markets have been reactive; passengers to Truth Social rather than fundamentals.

Beneath the surface, the picture remains stronger than daily price action suggests. Panic is rarely a profitable strategy. History rewards patience, and over time fundamentals such as earnings, growth and economic strength prevail over short-term geopolitical noise.

Last week equities and bonds both performed well, but measurements week-on-week have often felt unhelpful given the scale of daily moves. An interesting pattern has emerged where markets have been weak in the last days of each week as investors have been cautious of carrying risk into the weekend, which has often been where the key developments in the war have occurred. Easter broke this trend with global equities rising 3.6% in sterling terms. Regions and sectors most sensitive to the conflict were the biggest winners. The optimism stemmed from emanations out of Iran that some form of settlement was possible in the short-term.

Communication Services and Technology alongside the Materials and Real Estate sectors gained the most. Bonds also rallied with gilts (UK government bonds) leading the charge with the 10-year gilt yield falling 0.14% to 4.83%.

Markets open today on stronger footing with events over the weekend thankfully mostly muted following the terrific rescue of the downed F-15E servicemen. Optimism could fade quickly with Trump’s self-imposed deadline on Iran to re-open the Strait of Hormuz by 20.00 EST today. Trump threatens extensive strikes against Iran’s infrastructure, specifically bridges and energy production facilities.

For European policymakers, the focus remains on reopening the Strait of Hormuz through diplomacy rather than military escalation. That requires coordination with regional powers and other major energy importers, while attempting to reduce Iran’s incentives to keep the Strait closed without provoking further tension with the US. This is a difficult balance to strike. Nonetheless, the UK’s Foreign Secretary, Yvette Cooper hosted a call with counterparts from about 40 other nations aimed at doing exactly that. Europe is not insulated from this conflict. Its reliance on imported energy leaves it particularly exposed, and the adopted ‘this is not our war’ philosophy to-date sits in contrast with economic reality.

Economic data over the week was supportive, particularly the S&P Global Manufacturing survey, which reported expanding manufacturing activity globally despite the war. This was complemented by a particularly robust US labour market report with 178k new jobs created in March, the biggest increase since 2024. Although this was a strong report, previous numbers were revised lower and this data is set amidst a broader cooling trend for the labour market.

From a corporate perspective, profit margins continue to edge higher and will be a key focus as we move into the upcoming reporting season. The recent improvement has been supported in part by the strength in the energy sector, but it is also evident more broadly across the market. As long as companies are able to maintain or expand margins, markets tend to remain well supported from a fundamental perspective. That still appears to be the case today. While there is always a risk that earnings disappoint against a more uncertain backdrop, there is little evidence of any meaningful deterioration so far.

The first quarter ended with another note of confidence where global M&A activity recorded its most impressive first quarter in history with total transactions of US$1.3tn. On this front there is an exciting pipeline for deals and IPOs for the remainder of 2026. It is still early days to say with any certainty what the impact of a potential extended conflict will mean for deal activity and for the global economy, but there are many reasons to remain optimistic.

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The week ahead

Tuesday: Trump’s deadline on Iran

“All hell will rain down on Iran” if the Strait of Hormuz is not opened today by 20.00 EST, according to President Trump. Both sides are reportedly negotiating a ceasefire but will be far from agreeing terms, it seems that today escalation is more likely than successful negotiation.

Oil prices remain elevated six weeks into the conflict, and the longer the disruption persists, the greater the risk that the inflation impulse feeds more meaningfully into the global economy. The window for a clean resolution is narrowing. Without a de-escalation, markets may be forced to reassess the current balance between resilient fundamentals and rising geopolitical risk.

Friday: US CPI inflation

Inflation is expected to rise to 3.4% for March thanks to rising gasoline prices, the most immediate impact from the Iran war. Economists expect a monthly reading of 1%, the highest since June 2022.

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