Arta Market Brief — April 2026: Navigating an Energy Shock

Written by Brandon Ho, CFA, Head of Investment Advisory, Singapore Commentary as of 7 April 2026

March saw a gradual shift in what was driving markets, with geopolitical developments and energy prices moving more firmly into focus. Volatility remained elevated as investors responded to escalating tensions in the Middle East, a sharp rise in oil prices, and the resulting implications for inflation and interest rate expectations.

While this shift in drivers led to notable swings across equities, bonds, and commodities, the broader macro and earnings backdrop has not materially deteriorated. Distinguishing between short-term disruptions and longer-term fundamentals remains important in periods like these.

1. Macro Backdrop

The macro environment in March became more layered, with geopolitics and energy markets moving to the forefront.

The escalation of the Middle East conflict and prolonged disruption to the Straits of Hormuz led to a meaningful rise in oil prices.¹ This introduced renewed uncertainty around inflation, particularly given that price pressures had only recently shown signs of moderating.² As a result, what had been a relatively straightforward disinflation narrative became less clear cut.

In the United States, economic activity remained broadly stable. Manufacturing indicators stayed in expansionary territory,³ while labour market data pointed to some moderation but not a sharp slowdown.⁴ This combination has left central banks navigating a more complex trade off between supporting growth and containing inflation.

Market expectations adjusted accordingly. Earlier assumptions around the pace of rate cuts were scaled back, with investors increasingly recognising that policy decisions may take longer to evolve in an environment where inflation risks remain present, raising questions around stagflation risks.⁵ More recently, expectations have begun to stabilise, with markets assessing whether the energy shock will have a sustained impact on inflation.

2. Market Developments: Rotation and Repricing

Asset price movements during March reflected both the macro backdrop and changing investor priorities.

US equities underwent a period of consolidation, with headline index declines, even as dispersion across sectors increased. Larger, more established companies generally showed greater resilience, supported by stronger balance sheets and earnings visibility. In contrast, areas where valuations had been more sensitive to future growth assumptions, such as segments of software, saw more pronounced adjustments.

At the same time, parts of the market linked to ongoing AI capital expenditure themes, including semiconductors and infrastructure, remained relatively supported. This highlights how the broader technology narrative is becoming more differentiated rather than uniformly strong.

Outside the US, markets with higher reliance on imported energy faced additional pressure, reflecting the uneven global impact of rising oil prices.

In fixed income, yields moved higher over the course of the month.⁶ The adjustment was notable not just for its magnitude, but for the way bonds behaved alongside equities. Higher yields also resulted in negative returns across many fixed income segments. Instead of offering the usual diversification during periods of equity weakness, rising yields contributed to more positively correlated movements across the asset class.

Commodities were a central area of focus. Energy prices rose sharply, while gold experienced heightened volatility over the course of the month.⁷ Initial gains driven by safe-haven demand were followed by a pullback as concerns around oil-driven inflation and higher interest rates weighed on sentiment, before prices stabilised later in the month. More recently, price movements have become increasingly sensitive to incremental developments around potential de-escalation. Silver, which has both precious metal and industrial characteristics, underperformed gold as weaker growth expectations and higher real yields weighed on demand.

3. Asset Class Perspectives

Equities

Corporate fundamentals, particularly in the US, remain relatively robust. Earnings expectations continue to be supported by structural drivers, including ongoing investment in technology and infrastructure. However, the dispersion seen in March suggests that markets are becoming more selective, with greater differentiation between more resilient business models and valuation levels.

Fixed Income

Higher yields have created a more balanced starting point for fixed income compared to recent years. While near-term price movements have been impacted by inflation concerns, income generation is becoming a more meaningful component of total returns. The experience in March also highlighted that in periods where inflation expectations are the primary driver, bonds may not provide the same level of diversification against equity volatility.

Commodities and Real Assets

The events of March reinforced the central role of commodities, particularly energy, in shaping macro expectations. The rise in oil prices, driven by supply disruptions, has added upward pressure on inflation and influenced interest rate expectations.

Gold’s performance during the month appeared counterintuitive at first glance. While typically viewed as a safe haven asset, its movements were now driven more by changing expectations around inflation and interest rates than by geopolitical headlines alone. Higher oil prices increased the likelihood of interest rates remaining elevated, which can weigh on gold given its lack of income. This dynamic contributed to the initial pullback, before signs of potential de-escalation later in the month allowed prices to recover.

Silver, which has both precious metal and industrial characteristics, underperformed gold. In addition to the impact of higher yields, concerns that elevated energy prices could weigh on growth expectations contributed to softer demand.

4. A Few Things To Watch

• Energy market dynamics: The duration of supply disruptions and their impact on oil prices remain central to both inflation and growth expectations.

• Monetary policy path: Central banks may remain cautious as they assess whether higher energy prices feed into broader inflation.

• Earnings resilience: The ability of companies to sustain margins in a higher cost environment will be an important driver of equity performance.

• Market alignment: While inflation concerns have been a common driver across asset classes, differences in how markets are weighing implications for growth and interest rates suggest that further adjustments may occur as more clarity emerges.

5. Behavioural Perspective: Navigating Volatility

Periods like March can bring recency bias back into focus, particularly after extended phases of relative market stability.

When conditions change quickly, there can be a tendency to overweight the most recent developments, such as rising oil prices or shifting rate expectations, and project them forward more persistently than may ultimately materialise. This can influence how investors interpret both risks and opportunities.

Following a period where markets were focused on moderating inflation and potential rate cuts, the abrupt shift in March may lead to an equally strong emphasis on inflation risks and policy tightening. Recognising this tendency can help maintain perspective, especially when the longer-term outlook may still be shaped by a broader set of factors beyond the most immediate headlines.

6. Looking Ahead

As April begins, markets are likely to remain sensitive to both geopolitical developments and incoming economic data.

There are early indications that efforts toward de-escalation may be developing, although the timing and outcome remain uncertain. At the same time, the underlying economic backdrop, particularly in the United States, continues to show resilience.

In the near term, market movements may continue to reflect this balance between uncertainty and underlying stability, with energy prices remaining particularly sensitive to developments around supply disruptions and potential de-escalation. Over a longer horizon, structural themes such as technological investment and earnings growth remain relevant, even as the path forward may be less linear.

¹ Bloomberg; US Energy Information Administration (EIA).

² US Bureau of Labor Statistics.

³ Institute for Supply Management (ISM); S&P Global PMI.

⁴ US Bureau of Labor Statistics.

⁵ CME FedWatch Tool; Bloomberg.

⁶ Federal Reserve Bank of St. Louis (FRED); Bloomberg.

⁷ Bloomberg; World Gold Council.