In the first quarter of 2026, markets were reshaped by a confluence of forces that few had anticipated at the turn of the year: an escalating geopolitical conflict in the Middle East, a dramatic energy price shock, renewed inflation concerns, and a consequent reassessment of central bank policy paths globally.  What began as a continuation of the broad rotation away from US mega-cap technology that started in late 2025 became increasingly dominated by the macroeconomic implications of the US-Iran conflict. The quarter ended with risk assets broadly in the red, but meaningful pockets of outperformance in energy, defensive equity, and select non-US markets that validated the importance of diversification.

Macro backdrop

The defining macro event of the quarter was the escalation of the conflict between the United States, Israel, and Iran.  On 28 February 2026, coordinated airstrikes targeted Iranian military and nuclear facilities. Iran retaliated with missile and drone attacks...