Markets moved quickly from early anxiety to a broad relief rally as confidence returned through the week.
Read this article to understand:
- How markets reacted to fast-moving events in the Gulf
- Why equities and bonds recovered over the week
- The importance of discipline and diversification
The week began with markets on edge after talks between the US and Iran broke down over the weekend. Tensions escalated quickly when the US announced it would blockade the Strait of Hormuz, one of the world’s most important routes for oil shipments. Markets reacted sharply. Brent crude surged above $100 a barrel again, reviving the ongoing fears of a prolonged energy shock. Equity markets fell at the open on Monday. Confidence was fragile, as markets braced for another difficult week.
But the anxiety did not last long. By Monday evening, the mood shifted from fear to relief. Hints that talks between the US and Iran might resume helped calm nerves and reverse much of the early-week market stress. Oil prices retreated towards the mid-$90s a barrel, easing pressure on households, companies and central banks alike. With fears of a lasting supply shock fading, investors became more willing to take risk again.
Equity markets responded strongly. In the US, the S&P 500 climbed steadily through the week, reaching new record highs above 7,000. The S&P 500 has now recovered by 11 per cent since its lows on March 30, just 17 days ago. The tech-heavy NASDAQ index has also enjoyed its longest winning streak since 2009, rising for twelve consecutive sessions.
Asian markets followed suit, with Japan and South Korea posting solid gains as global sentiment improved. European shares also rose, though more modestly. They were supported by lower energy prices but occasionally weighed down by domestic political concerns. Despite the events that have impacted markets, global equities, as measured by the MSCI ACWI index, are up by over five per cent since the beginning of the year in local-currency terms.
Bond markets told a similar story over the week. After an initial wobble, government bond yields drifted lower as inflation worries eased. In the US, jobless claims remained close to historic lows, pointing to a labour market that is still holding up well. Data on core inflation in the US was softer than expected, offering reassurance that last year’s price pressures continue to cool.
Meanwhile, in Europe, signals that the European Central Bank is in no rush to raise interest rates further helped steady markets. Borrowing costs for companies edged lower as confidence improved.
Company earnings also played a role in lifting sentiment. Early results from large US banks and consumer-focused firms suggested demand remains resilient and profits are holding up better than feared.
At the same time, gold prices slipped slightly as investors moved away from defensive assets. Gold remains up by about ten per cent since the beginning of 2026, well above levels seen a year ago. But this week’s dip reflected a shift back towards growth-linked markets as fear receded.
One of the most striking features of the week was how quickly markets looked past Monday’s initial shock. In recent weeks, investors have been focused on inflation staying higher for longer and interest rates becoming increasingly restrictive. This week, attention swung back towards growth, earnings and the idea that recent stresses may prove temporary.
History shows markets often recover faster than expected after geopolitical shocks, and many investors are leaning on that experience once again. That optimism may yet be tested. Oil prices are lower, but still elevated. Inflation is easing but not defeated. For now, markets are choosing to look through the risks rather than dwell on them.
The week served as a reminder of how quickly sentiment can turn, and why staying diversified and disciplined matters most when markets appear calm again.1
Past performance is not a reliable indicator of future results.
References
- Source of all the data for this article: Aviva Investors and Bloomberg. Data as of April 17, 2026.
