Stocks, bonds and commodities: How global markets have traded the Iran war

Stocks, bonds, currencies and commodities have all been gripped by volatility over the course of the past month, with many assets seeing wild swings and major losses as the U.S.-Iran war drags on.

While there have been some outliers, bearish sentiment has largely dragged assets lower over the course of the month.

Equities across the globe have been dragged into a bruising sell-off in the five weeks of war between the U.S. and Iran. On Wall Street, all three major averages are on course to end the month in negative territory.

But the sell-off has had much deeper implications for many markets beyond New York, with the outperformance achieved by some international indices last year now upended.

Concerns about the Iran war’s impact on energy and inflation have weighed on sentiment toward markets in Europe and Asia, which are far more dependent than the U.S. on oil and gas imports. South Korea, for example, has seen its Kospi index — the top-performing stock market of 2025 — fall by almost 20% in March, thanks to the country’s sensitivity to energy shocks.

In a Monday note, strategists at Goldman Sachs said the “balance of risks has worsened” for equity markets and the probability of a stagflationary outcome has increased.

“Stagflation has historically been a poor environment for equities, characterised by low real performance and elevated volatility: the median real quarterly Stoxx 600 return falls to around -1%, compared with +3% in non‑stagflation periods,” they said. “We do not think the market is fully pricing stagflation. Under stagflation, we would expect further equity downside and weak real returns.”

Dan Coatsworth, head of markets at AJ Bell, shared three tips on trading a falling market in a note earlier this month: diversify, stick with an investment plan, and don’t over-trade.

“Constant buying and selling incurs costs and eats into your returns,” he said. “Markets have seen wild swings [since the war began], and this volatility might have encouraged investors to bet that certain stocks or funds will move one way or another. The market has quickly changed direction repeatedly, leaving some people sorely disappointed. Sometimes less is more when it comes to investing, rather than picking stocks or funds and selling out a few hours or days later. Investing is about taking a long-term view.”

Bond yields — which move inversely to bond prices — have been steadily rising throughout March, as investors race to reprice the chances of rate hikes from central banks. Expectations of rate cuts at central banks like the Federal Reserve and the Bank of England have fallen, and in many cases been replaced by anticipations of hawkish monetary policy, sending yields on some European bonds to multi-decade highs.

“The U.S. and European breakeven curves surged as markets repriced inflation expectations and the likelihood of central-bank rate cuts,” strategists at Amundi said on Tuesday. “Nominal yields, particularly at the short end, also rose sharply in countries including the U.K. At this stage, some of this reaction seems excessive to us. We think the length of time that energy prices remain high will determine the second-round inflationary effects.”

In March, the dollar index — a gauge of the greenback’s performance against a basket of major rivals — is on track to gain around 3%.

“Energy‑driven stagflation risks are supporting the USD in the near term,” strategists at OCBC said in a note on Monday. “A softer USD may emerge if oil prices fall in 2H26, though resilient US growth will restrict how far the USD can slip.”

Meanwhile, HSBC analysts said in a note that March drawing to a close serves as “a sobering reminder of how much has changed from end-February.”

“We still find ourselves looking back to the start of the Russia-Ukraine war, the fallout in the shape of higher commodity prices and the FX impact,” they said. “Like then, the USD is having the upper hand, Asian and European currencies are struggling amid higher oil, natural gas, fertilizer and petrochemical prices and LatAm FX is a preferred region within an EM context.”

“Our view is that the decline in gold is likely to be relatively short-lived,” Mark Haefele, Global Wealth Management Chief Investment Officer at UBS, said in a Monday note. “While the timing is hard to pinpoint, we do expect gold to rebound and forecast the precious metal to climb to USD 6,200 an ounce by the end of June, scaling back to USD 5,900/oz in early 2027, from around USD 4,500/ oz at present.”

Aluminum prices have also been rocky, with Iranian attacks on producers of the metal across the Gulf region fueling fears of global supply shortages. Copper markets, meanwhile, are being influenced by economic pessimism.

On Tuesday, data out of Europe showed euro zone inflation had jumped above the European Central Bank’s 2% target to hit 2.5% in March. Officials said they expected energy inflation to have hit 4.9% in March, up from a contraction of 3.1% the previous month.

“The sheer pace of oil price hikes presents a major risk that consumers could face a sharp increase in the cost of living,” AJ Bell’s Coatsworth said. “This could potentially lead to a drop in consumption or more selective purchases until consumers get a better grasp on whether higher prices are a short-term issue or a permanent change.”