The past three months have been shaped by one dominant event: the outbreak of conflict in the Middle East, which has disrupted global energy markets, pushed inflation higher, and rattled investor confidence around the world.

Share markets

Australian shares had a volatile quarter. The ASX 200 hit an all-time high above 9,000 points in mid-February — its best February performance since 2019 — before falling sharply by more than 8% in March as the Middle East crisis intensified. Markets have since partially recovered and were trading around 8,650–8,700 in late May. Resources companies including BHP and Lynas Rare Earths bounced back strongly, while consumer-facing businesses remained under pressure. Globally, US and Chinese markets also recovered in April and May on hopes of a diplomatic resolution to the shipping disruption.

The Australian economy

Inflation jumped to 4.6% in March 2026 — the highest level since September 2023 — driven largely by surging fuel costs. In response, the Reserve Bank of Australia raised the official cash rate three times this year to reach 4.35%, squeezing household budgets and dampening business confidence. Economic growth forecasts have been revised down, with most economists now expecting GDP growth of around 1.8% for the year ahead. The outlook for further rate rises has become less certain following some softening in the jobs market.

The global economy

The conflict has caused the largest disruption to global oil supply in history, with shipping through the Strait of Hormuz — a waterway through which roughly a quarter of the world’s seaborne oil passes — severely restricted. Energy prices are forecast to be around 24% higher in 2026 than in 2025. The IMF has revised its global growth forecast down to around 3.1%, while global inflation is expected to average 4.4% this year. Asian economies, including Japan and South Korea, which rely heavily on Middle Eastern oil, have been hit hardest. A brief ceasefire in May provided some relief, but uncertainty remains high.

We will continue to monitor developments closely. If you have questions about how these conditions may affect your financial plan, please do not hesitate to contact our office.