Monthly report for the period ending 31 March 2026

Global and New Zealand markets fell sharply in March as conflict in the Middle East intensified and oil prices jumped. New Zealand’s share market fell -5.8% for the month, roughly in line with falls in overseas shares (MSCI World, local currency, −5.7%).

Energy was the strongest sector while most other sectors fell. The international benchmark price for oil (Brent), used worldwide to set fuel and commodity prices, surged about 63.3% in March, finishing near US$118 per barrel, causing the broader commodity index to rise strongly. Higher fuel and transport costs created a near-term inflation risk that could push up prices for households and businesses.

New Zealand entered 2026 with economic recovery gaining momentum, but the Middle East conflict risks derailing this. Prior to the conflict, consumer confidence data showed NZ consumers becoming more optimistic, but it has since slipped back into pessimistic territory in response to higher fuel costs and concerns this may drive inflation higher.

On interest rates and currencies, the Reserve Bank of New Zealand held the Official Cash Rate at 2.25% at the early April meeting and signalled concern about higher fuel-driven inflation. Other major central bank rate decisions largely stayed on hold as well but adopted a more hawkish tone (a policy stance that aligns with tighter monetary measures to supress inflation, even if it risks slowing economic growth). Cash remained one of the few safe havens as these fears carried through to markets.  The New Zealand dollar weakened against all major currencies, down between -4.9% - 2% against the USD, JPY, GBP and EUR in March.   

Although the economic backdrop has shifted since the start of the year, with slower growth and higher inflation, growth in most economies is still expected to remain around trend. However, higher inflation is likely to limit the scope for further monetary policy support. Artificial Intelligence driven investment is expected to keep supporting growth, especially in the US and some emerging markets. Share markets are still supported by strong fundamentals, AI optimism, and fiscal stimulus, but valuations are high and Middle East conflict risks remain elevated.

Significant developments include:

• Geopolitical escalation in the Middle East, including attacks affecting shipping routes and oil supplies, which raised oil prices sharply and increased market volatility.
• The RBNZ held the Official Cash Rate at 2.25%, noting higher fuel prices increase inflationary pressure and will be monitored closely.