A sharp escalation in geopolitical risk
March delivered one of the most volatile and confronting periods for global markets in recent years. The primary driver was a sharp escalation in geopolitical tensions centred on the Middle East, particularly the disruption to energy flows through the Strait of Hormuz.
What began as a regional conflict quickly evolved into a global macro event, with significant implications for oil and gas markets, inflation expectations, and broader financial conditions.
Energy markets lead the way
The most immediate impact has been felt in energy markets. With a meaningful portion of global oil and LNG supply either disrupted or at risk, oil prices surged above US$100 per barrel at points during the month.
Unsurprisingly, energy-related equities have been standout performers. Oil producers, infrastructure assets and select commodity-linked companies have benefited from higher prices and tightening supply dynamics.
Broader equity markets under pressure
Beyond energy, the picture has been more challenging. Equity markets have been volatile, with broad-based declines punctuated by sharp rallies on any hint of de-escalation.
Growth sectors, particularly technology and smaller companies, have come under pressure. Importantly, this has not been driven by weakening demand - structural themes such as artificial intelligence investment remain intact.
Instead, the pressure has come from macro effects: rising energy prices have lifted inflation expectations and increased the likelihood of ‘higher-for-longer’ interest rates, weighing on valuations - especially for long-duration assets.
A headline-driven investment environment
From a portfolio management perspective, this has been a particularly demanding period - now the fourth major ‘crisis’ investors have faced in the past six years.
Markets have been almost entirely headline-driven, with developments around escalation and de-escalation occurring daily, sometimes hourly. Each update has had the potential to move markets sharply in either direction.
In this environment, maintaining discipline and focusing on underlying fundamentals - rather than reacting to every headline - has been critical.
Signs of stress in financial markets
We have also observed emerging stress in parts of the financial system. Credit markets have tightened, liquidity has become more selective, and capital has flowed out of higher-risk regions and sectors.
Asian equity markets, including Taiwan and Korea, have experienced notable outflows, reflecting both their exposure to global growth and their role in technology supply chains.
Separating short-term noise from long-term fundamentals
While the headlines have been dramatic, it is important to distinguish short-term uncertainty from long-term fundamentals.
At Pie Funds, we have nearly 20 years of experience navigating crises - from the Global Financial Crisis to COVID-19, and more recently last year’s tariff-driven sell-off. Each period felt highly uncertain at the time, yet in every case, the world adapted, solutions emerged, and markets ultimately recovered.
Markets move ahead of clarity
One of the most consistent lessons from these episodes is that markets do not wait for clarity.
They tend to bottom not when uncertainty is resolved, but when conditions simply stop deteriorating. By the time the “all-clear” becomes evident, a significant portion of the recovery is often already behind us.
Looking ahead: uncertainty and opportunity
While it is impossible to predict the precise path forward, we remain confident in two key points:
The current energy shock will be addressed over time - through geopolitical resolution, alternative supply, or demand adjustment.
Periods like this often create opportunity, as high-quality companies are sold indiscriminately alongside weaker ones.
Our focus
As always, our focus remains on navigating short-term volatility while positioning portfolios to benefit from the eventual recovery.
If you have any questions or concerns about your portfolio, our team is here to help. Please don’t hesitate to get in touch – our contact details can be found
here.
Thank you for your trust.