My view
March was a month of repricing.
Markets shifted abruptly from optimism to caution as the escalation involving Iran and disruption to Middle East energy flows forced a reassessment of inflation, interest rates and growth.
Oil was the key transmission mechanism. By month-end, Brent crude had risen to ~US$112.57 per barrel (+55%), while both the ASX 200 and S&P 500 fell ~7.4%.
The Reserve Bank of Australia responded by lifting the cash rate to 4.10%, citing renewed inflation pressure, higher fuel costs and rising inflation expectations. February CPI at 3.7% (trimmed mean 3.3%) confirmed inflation was already above target before the March energy shock.
The backdrop is now clear:
- Fiscal policy remains expansionary
- Monetary policy is tightening
- Households remain highly leveraged
This combination materially increases the probability of:
- Higher-for-longer interest rates
- Weaker discretionary consumption
- Elevated market volatility
Inflation remains the central threat to real wealth. For borrowers refinancing and investors concentrated in domestic cyclicals, the pressure is immediate and structural.
At a structural level, Australia’s risk profile continues to deteriorate, driven by:
- Persistent fiscal expansion
- Lack of tax reform
- Increasing regulatory burden
- Inconsistent energy policy
- Immigration not aligned with infrastructure capacity
The outcome is reduced competitiveness, capital outflows and gradual erosion in living standards.
Global Overview
Markets repriced around two dominant forces:
1. Iran war and the oil shock
The conflict has evolved beyond a contained event into a material inflation and growth risk.
Energy markets repriced sharply, reflecting:
• Risk to Strait of Hormuz supply
• Sustained disruption scenarios
• One of the largest upward revisions to oil expectations in recent history
Higher energy prices act as a tax on global growth while reinforcing inflation — complicating central bank policy.
2. Central-bank repricing
The oil shock has disrupted the disinflation narrative.
Markets have shifted from expecting rate cuts to pricing:
• Prolonged restrictive policy
• Higher volatility in rate expectations
• Increased risk of policy error
The implication is simple: policy support is less reliable.
Australian Overview
March marked a clear deterioration in domestic conditions.
- ASX 200: -7.4%
- Small caps: -11.9%
- AUD weakened to ~0.69 USD
Australia remains highly sensitive to:
- Rising rates
- Fuel costs
- Consumer confidence
Fuel is critical. Sustained increases will directly reduce discretionary spending and weigh on growth.
Market leadership is likely to narrow toward:
- Quality balance sheets
- Essential services
- Real assets
- Income-generating exposures
Fiscal Policy & Inflation
Australia continues to operate with a conflicting policy mix:
- Expansionary fiscal settings
- Restrictive monetary policy
This is inherently inflationary.
Inflation was already sticky before the oil shock. Higher energy costs now increase the risk of:
- Rising headline inflation
- Slower disinflation in core measures
- Prolonged pressure on interest rates
Inflation remains the dominant macro risk — impacting income, valuations and policy flexibility.
Geopolitical Risk Watch
Geopolitics is now a core macro driver.
Middle East / Iran:
Risk is no longer escalation alone — it is duration and supply disruption.
Oil:
• De-escalation: US$80–90
• Ongoing disruption: US$100–110
• Severe escalation: US$150+
Sustained elevated oil reinforces inflation and delays policy easing.
Australia vulnerability
The conflict highlights reliance on global shipping and energy supply chains — a structural risk often underestimated.
Australian Outlook
Australia risks entering a reinforcing cycle:
- Government spending sustains demand
- Demand sustains inflation
- Inflation sustains higher rates
- Higher rates pressure households
The oil shock intensifies this dynamic.
The implication for investors:
- Prioritise diversification and liquidity
- Focus on quality and income
- Reduce reliance on falling rates
- Maintain global exposure
In summary
March was not panic — it was repricing.
Markets are adjusting to a world where:
- Energy security matters
- Inflation is less predictable
- Central banks have limited flexibility
The strategy remains clear: stay invested, but be more selective, more disciplined and more valuation-aware.
Should you have any question do not hesitate to reach out.
Summary of Major share indices
Index | 1 Month | 52 Weeks | YTD |
DJIA | -4.45% | +10.36% | –3.58% |
Nasdaq | -4.11% | +23.73% | -7.11% |
S&P 500 | -4.23% | +15.90% | -4.63% |
Russel 2000 | -4.29% | +24.06% | +0.58% |
Europe 600 Index | -3.52% | +8.06% | -1.53% |
UK FTSE 100 Index | -2.93% | +17.85% | +2.47% |
Hong Kong Hang Seng | -3.80% | +6.81% | -3.29% |
Japan Nikkei 225 | -9.27% | +43.34% | +1.44% |
China Shanghai Composite | -5.60% | +16.23% | -1.94% |
India S&P BSE Sensex | -10.33% | -7.06% | -15.57% |
ASX 200 (Australia) | -6.56% | +7.02% | -2.67% |
Summary of Major share indices
Close | 52-week Range | |
AUD | 0.6900% | 0.5916-0.7191% |
Australian Dollar
Close | 52-week Range | |
US 3 Month Bill | 3.684% | 3.58-4.454% |
US 10 Years Note | 4.318% | 3.864-4.632% |
US 30 Years Bond | 4.914% | 4.325 – 5.154% |
Australia 10 years | 4.950% | 4.039-5.180% |
Source: Wall Street Journal.