Global Markets
Note: All quoted equity performance figures are in GBP terms.
The second quarter of 2026 was shaped largely by events in the Middle East and their impact on global energy markets. Brent crude experienced significant volatility as disruption to shipping through the Strait of Hormuz intensified, briefly reaching a wartime high of $126 per barrel in early May before ending the quarter below $73 as progress towards a ceasefire and plans to reopen the Strait improved market sentiment.
Artificial intelligence (AI) remained a key market theme, with technology and semiconductor stocks experiencing periods of volatility as investors balanced strong corporate earnings against concerns over valuations and infrastructure spending. SpaceX completed the largest initial public offering in history, while Anthropic and OpenAI also announced plans to go public.
US equities experienced a volatile quarter as markets responded to oil prices, geopolitical tensions and changing monetary policy expectations. Despite a weak start, the S&P 500 recovered to finish the quarter up 15.1% and 10.0% year to date, supported by strong earnings from major technology companies including Alphabet, Nvidia and Micron.
UK equities also remained resilient, with the FTSE 100 benefiting from its global earnings exposure and strength in commodity-related sectors. Although weaker domestic economic data, lower oil prices later in the quarter and political uncertainty weighed on sentiment, the index finished the quarter up 4.0% and 7.6% year to date.
Asia ex-Japan was the strongest-performing major equity region, led by strong demand for semiconductor and technology companies in South Korea and Taiwan.
The UK economic backdrop was mixed. While GDP data released early in the quarter exceeded expectations, confidence softened as the quarter progressed amid energy-driven inflation, supply chain disruption and weaker consumer demand.
Equity Styles
Growth stocks rebounded strongly during the second quarter as enthusiasm for AI returned, reversing the leadership previously enjoyed by value stocks and smaller companies earlier in the year. Renewed capital spending guidance from major technology companies revived investor appetite for higher-growth businesses, bringing an end to value stocks' period of outperformance.
Inflation
Inflation and bond markets were heavily influenced by developments in the Middle East. Central banks adopted a cautious approach for much of the quarter, with the Federal Reserve, Bank of England and European Central Bank initially leaving interest rates unchanged. The European Central Bank later raised rates by 25 basis points to 2.25%, becoming the first G7 central bank to respond directly to the energy shock, while the Bank of Japan also increased its policy rate to 1.0% in June, its highest level since 1995.
Inflation data remained mixed across regions. UK Consumer Prices Index (CPI) inflation rose to 3.3% in March before easing to 2.8% in April and remaining unchanged in May. By contrast, US inflation accelerated, with CPI reaching 4.2% in May and Personal Consumption Expenditures (PCE) inflation rising to 4.1% over the 12 months to May. However, there is optimism that falling oil prices will help ease inflationary pressures in the coming months.
Fixed Income
Note: All quoted fixed income performance figures are in GBP-hedged terms.
Bond markets were also affected by the conflict. UK and US government bond yields rose significantly during April and May, with the yield on the UK 30-year gilt briefly moving above 5.8% in early May, its highest level since 1998.
Volatility eased towards the end of the quarter as oil prices fell and investors became increasingly confident that the worst of the energy shock had passed. UK 10-year and 30-year gilt yields finished June broadly in line with their levels at the end of March.
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