Global markets recalibrate amid geopolitical tensions and AI disruption

During the review period (29 November 2025 to 5 March 2026), global financial markets underwent significant recalibration, moving away from previously high-performing assets.

Investors rotated from US large-cap and growth stocks towards European, Japanese, and emerging market equities, despite solid earnings, as concerns over artificial intelligence (AI) spending and disruption weighed on technology companies.

Foreign exchange markets signaled growing unease; the US dollar initially depreciated, while the Swiss franc appreciated, a hallmark of risk-off episodes.

This trend reversed with escalating geopolitical tensions in the Middle East in early March, driving oil and natural gas prices higher.

Precious metals, including gold and silver, experienced notable volatility, surging early in 2026 due to safe-haven demand and speculative interest, but later came under pressure, trading more like risk assets.

Sovereign bond markets diverged across advanced economies, with long-term yields rising sharply in Japan while remaining sideways in the United States and the euro area.

Euro area sovereign spreads widened after the Middle East conflict erupted, and inflation expectations edged up, pushing back anticipated US rate cuts.

Credit markets remained stable overall, but private dealmaking declined from earlier peaks, and concerns over AI-driven disruption refocused attention on private credit portfolios, particularly those with significant software exposures.

The review also highlighted the financing of AI infrastructure through on- and off-balance sheet borrowing, and the role of leveraged retail investors in the boom and bust of precious metals.