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

Stocks, bonds, currencies and commodities have all been affected by volatility in the past month, with many stocks seeing wild swings and big losses as the US-Iran war continues.

Although there have been some outliers, bearish sentiment has pushed stocks to record lows over the course of the month.

Financials around the world have been dragged into a bad trade during the five-week war between the US and Iran. On Wall Street, the three major averages are about to end the month in negative territory.

But the sell-off had a serious impact on many markets outside New York, with the positive performance achieved by other international indices last year now reversed.

Concerns about the impact of the Iran war on energy and inflation have affected sentiment on European and Asian markets, which are more dependent than the US on oil and gas supplies. For example, South Korea has seen it Kospi the index – the top performing market of 2025 – drops almost 20% in March, due to the country’s sensitivity to energy shocks.

In a Monday report, strategists at Goldman Sachs said the “risk balance has worsened” for equity markets and the possibility of a higher outcome has increased.

“Stagflation has always been a poor environment for equity, characterized by low real performance and high volatility: the real middle quarter. Stoxx 600 The return is about -1%, compared to +3% in the non-stagflation period. Under stagflation, we can expect further declines in equity and lower real incomes. “

Dan Coatsworth, head of markets at AJ Bell, shared three tips for trading a bear market earlier this month: diversify, stick to an investment strategy, and don’t over-trade.

“Buying and selling always incurs costs and eats into your returns,” he said. “Markets have seen wild changes [since the war began]and this uncertainty may encourage investors to bet that certain stocks or funds will move in a different direction. The market has changed direction rapidly over and over again, leaving some people very disappointed. Sometimes less is more when it comes to investing, rather than choosing stocks or funds and selling a few hours or days later. Investing is about taking a long-term view. “

Outside of interest rates, government borrowing costs have been rising amid a broader sell-off in the sovereign debt market.

Bond yields – which move inversely from bond prices – have been rising steadily throughout March, as investors race to back the possibility of rate hikes from central banks. Expectations of rate cuts at central banks such as the Federal Reserve and the Bank of England have faded, and in many cases have been replaced by expectations of hawkish monetary policy, sending yields to some of Europe’s highest in decades.

“Weaknesses in the US and Europe increased as the market raised inflation expectations and the possibility of central bank cuts,” strategists at Amundi said on Tuesday. “Nominal products, especially at the short end, also rose significantly in countries including the UK. At this time, some of these reactions seem to be too much for us. We think that the length of time that the price of energy remains high will determine the results of the second inflation.”

Foreign exchange markets have also been volatile, and the US dollar has been dragging its feet since President Donald Trump’s “freedom day” announcement last April.

In March, the dollar index – the greenback’s performance against a basket of major players – is on track to gain about 3%.

“Energy-driven risks support 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, although stagnant US growth will limit how much the USD can fall.”

Meanwhile, analysts at HSBC said in a note that the end of March was “a stark reminder of how much has changed since the end of March.”

“We still find ourselves looking back at the beginning of the Russia-Ukraine war, the fallout in the form of high commodity prices and the FX effect,” they said. “As of right now, the USD is strong, Asian and European currencies are struggling amid high oil, natural gas, fertilizer and petrochemical prices and LatAm FX is a favorite within the EM context.”

Steel markets have also become volatile. Gold – which is traditionally seen as a safe asset with the benefits of broader volatility – has been pulled from sales and is headed for its worst monthly performance since 2008. A strong dollar and the prospect of higher interest rates weighed on the price of gold, but many market watchers maintain a trade outlook on the yellow metal.

“Our view is that the decline in gold may be short-lived,” Mark Haefele, Global Wealth Management Chief Investment Officer at UBS, said in a report on Monday. “While the timing is difficult to pinpoint, we expect gold to rebound and predict the precious metal will rise to USD 6,200 an ounce by the end of June, returning to USD 5,900/oz in early 2027, from around USD 4,500/oz currently.”

Aluminum prices also remain strong, with Iran’s attacks on steel producers across the Gulf region fueling fears of a global supply shortage. Copper markets, however, are driven by economic pessimism.

At the heart of all market jitters is the energy market. The war with Iran, and the subsequent blockade of the Strait of Hormuz – a critical oil shipping route – has severely damaged the oil and gas markets, and their prices have skyrocketed.

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

“The high rate of oil price increases presents a significant risk that consumers could face a sharp increase in the cost of living,” said AJ Bell’s Coatsworth. “This may lead to a reduction in spending or more purchases until consumers better understand whether higher prices are a short-term issue or a permanent change.”