| GLOBAL MACROECONOMIC OVERVIEW |
Financial markets experienced increased volatility in March, as geopolitical developments took centre stage. While the year started on a constructive footing — with stronger growth expectations and moderating inflation — the escalation of conflict in the Middle East has shifted the balance of risks to the downside.
In particular, the US–Israel conflict with Iran has introduced a significant energy shock, triggering a sharp increase in energy prices. Oil prices have risen materially, prompting concerns around inflation, interest rates and global growth.
United States
The US economy continues to demonstrate resilience, although recent data suggests slowing momentum. Growth has been supported by a combination of strong consumer spending, AI-related capital expenditure and supportive fiscal dynamics.
However, inflation pressures remain evident, with US producer price inflation (PPI) rising 0.7% month-on-month in February and 3.4% annually. Importantly, the US has been relatively insulated from the recent energy shock due to its position as a net energy exporter, although higher fuel prices are still impacting consumers.
Energy Shock and Global Impact
The defining macro development for the month has been the US–Israel conflict with Iran. The US commenced “Operation Epic Fury” on 28 February, launching military attacks on Iran aimed at neutralising Iranian nuclear threats. Iran retaliated via missile strikes targeting US bases and energy infrastructure across Gulf neighbours.
Furthermore, Iran closed the Strait of Hormuz — a major route for energy trade accounting for approximately 20% of global oil supply and global liquefied natural gas (LNG) flows. The escalation triggered a sharp rise in oil prices, with Brent crude surging 42.7% during the month, closing at $118 per barrel.
Economies with a high reliance on imported energy — particularly Europe, Japan, China and India — have come under greater pressure as higher fuel costs feed into input costs and inflation.
Interest Rate Outlook
At the beginning of the year, monetary easing was firmly expected as global inflation moderated. However, the recent energy shock has complicated this outlook. Major central banks — including the Federal Reserve, ECB, Bank of England and Bank of Japan — kept policy rates unchanged during March, but the tone has shifted to a more cautious stance:
- The Federal Reserve indicated it would look through short-term shocks, provided inflation expectations remain anchored.
- The ECB and BoJ warned that prolonged disruptions could require tighter policy.
- The UK faces renewed inflation risks, increasing the likelihood of tightening.
- The Reserve Bank of Australia has already moved to tighten policy, raising rates to 4.10% following persistent inflation pressures.
Overall, the outlook has shifted from expected easing to a “higher for longer” rate environment, particularly if energy prices remain elevated.
| GLOBAL MARKET PERFORMANCE |
Markets declined broadly across regions in March. The MSCI World Index fell 6.37% m/m in US dollar terms, while the MSCI Emerging Markets Index declined 13.03%. Japan (Nikkei 225) was among the biggest underperformers at -12.68% m/m, reflecting its heavy reliance on oil imports. The UK (FTSE 100) ended the month at -6.2% m/m.
Precious metals gave up previous gains, with gold falling 11.6%, platinum down 17.5% and silver declining 19.9% in US dollar terms. Bond markets were also more challenging, with rising oil prices pushing yields higher across the curve.
| Asset Class / Index | Return (m/m) | Currency |
| MSCI World Index | -6.37% | USD |
| MSCI Emerging Markets | -13.03% | USD |
| Nikkei 225 (Japan) | -12.68% | JPY |
| FTSE 100 (UK) | -6.20% | GBP |
| Gold | -11.60% | USD |
| Platinum | -17.50% | USD |
| Silver | -19.90% | USD |
| Brent Crude Oil | +42.70% | USD |
| FTSE/JSE All Share Index | -10.45% | ZAR |
| JSE Resources Sector | -15.24% | ZAR |
| FTSE/JSE All Bond Index (ALBI) | -6.83% | ZAR |
| STeFI (Cash) | +0.60% | ZAR |
| ZAR / USD | -6.23% | ZAR |
| SOUTH AFRICA |
Inflation slowed to 3.0%, but fuel price pressures are expected to push inflation higher toward 4%. The South African Reserve Bank (SARB) held rates steady at 6.75% on 26 March, citing upside risks to the inflation outlook due to the ongoing conflict in the Middle East.
Local markets experienced increased volatility, with equities under pressure and bond yields rising. The FTSE/JSE All Share Index reversed sharply, declining 10.45% m/m. The resources sector was the biggest detractor at -15.24% m/m. Local bonds also suffered losses, with the All Bond Index declining 6.83% m/m. Cash remained resilient, with the STeFI Index rising 0.6% m/m.
A stronger US dollar weighed on the rand and broader emerging market assets as investors moved toward the safety of the greenback. The rand weakened 6.23% m/m against the US dollar.
| FINAL THOUGHTS |
The key question for markets is whether the recent developments in the Middle East persist and continue to disrupt energy markets. If sustained, the energy shock could be a significant headwind — raising the inflation outlook and lowering global growth. This would likely keep interest rates higher for longer and maintain pressure on both equity and bond markets.
Conversely, any de-escalation in the conflict could see a sharp reversal in recent market moves. We continue to monitor developments closely and will communicate any material changes to our positioning as they arise.
Disclaimer
This document is prepared by Citrine Fund Managers (Pty) Ltd (FSP 53295) for informational purposes only and does not constitute financial advice. The information contained herein is sourced from sources believed to be reliable but is not guaranteed as to accuracy or completeness. Past performance is not indicative of future results. Citrine Fund Managers is an authorised Financial Services Provider under the Financial Advisory and Intermediary Services Act, 37 of 2002. All Citrine BCI funds are collective investment schemes managed by Boutique Collective Investments (RF) (Pty) Ltd. Please consult your financial advisor before making any investment decisions.