Quarterly newsletter, March 2026

Back-to-back rate rises and an oil shock

The quarter began positively, with the ASX 200 reaching a new all-time high of 9,202 in late February. However, the escalation of military conflict between the United States and Iran triggered a sharp reversal across global markets. The closure of the Strait of Hormuz sent oil prices surging above US$100 per barrel, reigniting inflation fears and disrupting global supply chains. The ASX 200 fell approximately 10% in in response, its worst monthly performance since June 2022, The ASX 200 Index closed March down 7.8%. These losses have continued into April.

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The Reserve Bank raised the cash rate by 25 basis points to 4.10% at its March meeting, following a hike of the same size in February. The back-to-back increases were driven by a material pick-up in inflationary pressures during the second half of 2025 and will be compounded by the energy price shock in the Middle East. Bond markets are now pricing in, further tightening with some forecasters expecting the cash rate to reach 4.85% by mid-year should oil prices remain elevated.

The Australian dollar traded around 69 US cents at the end of March, strengthening modestly over the quarter despite broad risk aversion. This AUD strength reflects Australia’s commodity exports benefiting from elevated global prices, combined with the RBA’s hawkish pivot relative to the US Federal Reserve, where the outlook is for rates to fall.

Domestically, inflation is highly elevated. Annual headline CPI rose to 3.7% in February, well above the RBA’s 2–3% target band, and the oil price shock will add further pressure. These cost increases will flow through to the broader economy, including the construction sector, where industry estimates suggest an additional circa $50,000 will be added to the cost of an average dwelling through higher fuel, transport, and material costs. Consumer confidence has plunged to record lows, weighed down by rising mortgage costs and geopolitical uncertainty.

While the immediate outlook is clouded by geopolitical risk, there are tentative signs of stabilisation. Late in March, reports emerged that President Trump may be willing to wind down the US military campaign, prompting a relief rally on the final trading day. Should conditions take a severe downturn, we expect governments will again support economic growth, and by extension, asset prices.

Returns for the 2026 Financial Year (9 months)

  • All Ordinaries: 8683, down 89 points, or 1.01%
  • S&P/ASX 200 A-REIT: 1507, down 298 points or 16.5%
  • 90 Day Bank Bills: 4.30%, up 0.69%
  • AUD vs US Dollar: 69.00c, up 3.21c or 4.88%
  • UK FTSE 100: 10176 points, up 1391 points or 13.66%
  • S&P 500: 6528 points, up 324 points or 4.9%

Guardian Investments Pty Ltd ABN 18 608 506 261 is a Corporate Authorised Representative of Guardian Associates Pty Ltd AFSL 238281. This page reproduces commentary published in March 2026 and is general advice only. It has not been tailored to your objectives, financial situation or needs, and the figures were current at the time of writing. Past performance is not a reliable guide to future returns. Seek personal financial advice before acting on it.