Year in Review: To 31 March 2026

Geopolitical events were the biggest driver of markets over the year. Repeated shocks — hostilities in the Middle East, a US operation in Venezuela, drone activity near NATO borders, and rising tensions in Asia — made investors nervous at times. When these events happened, oil and defence stocks often went up, while travel, luxury, and bank stocks tended to fall. Precious and other metals also did well as investors looked for protection.

Central banks moved in different directions, which made things confusing. New Zealand’s central bank cut rates several times as the local economy cooled. The European central bank eased earlier in the year. The US Fed stayed cautious for longer, then signalled it might ease later. By March 2026, rising energy costs made many central banks hesitant to cut rates quickly, which kept borrowing costs higher than some had expected.

New Zealand’s economy started the year stronger than expected but then slowed sharply. After a surprise rise in early 2025, GDP fell in the middle of the year, which prompted the Reserve Bank to lower interest rates.^[1] Trade and tariff worries added uncertainty, and inflation (which was pushed around by energy price swings) complicated decision making for central banks.

Notable events occurring throughout the year included:

• President Trump announced tariffs in April 2025. After multiple revisions to the proposed rates, the US applied a roughly 10% tariff to most nations. These tariffs were subject to multiple legal challenges. In February 2026, the US Supreme Court ruled the tariffs to be a violation of US Federal law. President Trump is expected to replace the invalidated tariffs with new, temporary import duties. Despite the significant volatility sparked by these tariff announcements, most major US indices (like the NASDAQ and S&P500) recovered their losses by July 2025.
• The US Government was shut down for 44 days during the December 2025 quarter – the longest shutdown since 1980 – as Congress debated a spending plan, before ultimately approving funding for key departments through to the end of 2026, and for the rest of the government through to January 2026. At the time of writing, another US Government shutdown is in effect for the funding which expired at the end of January 2026, primarily impacting the Department of Homeland Security. Market reaction has been fairly muted, with investors looking through the impacts of both these US Government shutdowns.
• The US and Israel launched military operations against Iran at the end of February 2026, including killing Iranian Supreme Leader Ali Khamenei. At the time of writing, the US and Iran have struggled to find common ground in peace negotiations with Iran’s nuclear ambitions a particular sticking point. Oil tanker traffic through the Strait of Hormuz (which accounts for about 20% of global maritime oil trade) has all but ground to a halt.

Oil prices have moved markedly higher, with Brent Crude hitting USD112 a barrel up from approximately USD70 before the start of the war. Markets remain volatile as market participants attempt to interpret the impact on the global economy of the virtual closure of the Strait of Hormuz.

^{[1] Gross Domestic Product (GDP) is the total monetary value of all goods and services produced within a country's borders in a specific time period, typically a quarter or a year. It serves as an indicator of economic health and growth.}