Market Review & Outlook 

What's happening and what it means for your super

The Middle East conflict is affecting global markets: The ongoing war in the Middle East and the closure of the Strait of Hormuz has pushed oil prices sharply higher. This is adding to the cost of living here in Australia and around the world and weighing on economic growth. Even if ceasefire talks progress, the flow-on effects to energy markets and supply chains will take some time to settle.

Interest rates are rising:  To manage inflation, central banks are lifting interest rates. The Reserve Bank of Australia (RBA) raised rates in both February and March this year, and further rises are possible. Most other major central banks are expected to follow a similar path in 2026.

We have seen some volatility:  This led to some sharp short-term falls in share markets. This is where having a diversified portfolio matters — by spreading investments across different asset classes, the impact of any single market falling is reduced.

Your returns remain positive Despite a softer March quarter, your super is still delivering. Members in High Growth (super) earned 7.41% for the year to 31 March 2026, and retirees in Conservative Balanced earned 6.27% over the same period.

See how all options have performed on our Investment Performance page.
 

What happened in Australia?

The Australian economy began the year with more momentum than expected, but the cost of living remains a concern. Inflation is still above the RBA's 2-3% target range, sitting at 3.7%. More recently, the war in the Middle East has triggered an oil shock - a sudden jump in oil prices caused by fears of disruption to supply –adding further pressure to inflation.

The RBA responded by lifting the cash rate in February and March, taking it to 4.1%. The Board is trying to balance two competing risks: inflation staying higher than expected on one side, and the risk that higher rates slow economic growth on the other. With uncertainty so high, the RBA has said that it can’t confidently predict where interest rates will go next.  
 

What happened overseas?

The global growth outlook has weakened, with uncertainty rising sharply after the military escalation in the Middle East. The effective closure of the Strait of Hormuz, the narrow shipping route through which around 20% of the world’s oil supply passes, has triggered an oil shock. As a result, oil has risen from the low to mid $70s per barrel before the conflict to over $100.

Because higher oil prices feed through to everyday costs like petrol, transport, food and utilities, they add to inflation at the same time as they risk slowing economic activity, a combination which is particularly challenging for central banks and governments to manage.

Even before the conflict, US economic activity had begun to soften as households faced slowing income growth. Higher oil prices are likely to further reduce their purchasing power, putting additional pressure on spending. Against this backdrop, it’s worth noting that the effects of the conflict on energy prices, shipping and supply chains are not expected to be quickly resolved, regardless of the success of ceasefire agreements or negotiations between the US and Iran.
 

Outlook

In Australia, the key question is how long oil prices stay high. If they remain around current levels or rise, inflation pressures are likely to rise as higher oil prices affect all parts of the economy. They lift transport costs across the economy, and because transport is a major cost in getting food from producers to supermarkets, higher freight costs can flow through to grocery prices. For goods that are imported or need to be moved long distances within Australia, higher shipping costs can also push up prices for items like clothing, electronics and household goods. This will put pressure on household budgets.

Because of these growing inflation pressures, many investors now expect interest rates to be raised twice this year, which will more than reverse the cuts made by the RBA last year.

How households respond will be important to watch. Consumers are already cautious, and further interest rate rises could lead them to cut back on spending. On the positive side, the job market remains relatively strong, with low unemployment and wages still growing, which helps support household incomes.

Internationally, the story is similar. Oil prices are now the main influence on global economic growth and inflation. If oil prices stay at current levels or even rise further, inflation is likely to increase, particularly in European and Asian economies that rely more heavily on imported energy. Higher energy costs raise expenses for households and businesses, leaving less money to spend elsewhere, which in turn slows economic growth.

The bottom line is that global central banks have a difficult challenge to navigate. The current oil shock is likely to be both inflationary and bad for economic growth at the same time. Higher oil prices push up the cost of living and business expenses, while also negatively affecting economic activity.

Normally, weaker growth and rising unemployment would allow central banks to cut interest rates to support the economy. However, when inflation is rising at the same time, central banks may be unable to lower rates, even as growth slows.

As a result, financial markets are now expecting interest rate increases in many countries, other than in the US. How long oil prices remain elevated will be critical in determining whether this slowdown is short-lived or turns into a more prolonged period of weaker economic growth.
 

What does it mean for returns from your super?

Periods of heightened uncertainty, like this oil shock, can lead to a more “risk‑off” environment in financial markets. When investors become more concerned about inflation, higher interest rates and slower economic growth at the same time, they typically reduce exposure to riskier assets such as shares and this can lead to increased market volatility and short-term falls in share markets. We’ve seen this recently, with some of the prior winners, like US technology stocks, falling the furthest.  

At the same time, expectations that central banks may need to keep interest rates higher for longer, or even raise rates further, have put downward pressure on bond prices. Bond yields move higher (and bond prices lower) when investors expect a higher path for interest rates, and this can be challenging for returns from fixed income markets in the short term.
 

What we’re doing

While it’s not possible to predict the reasons or triggers for market volatility, we expect these periods as a normal part of investing. What we’ve seen recently highlights why diversification, active management of our portfolio and a long‑term focus are key to our investment approach. Different asset classes respond differently to inflation, interest rates and economic conditions, and a well‑diversified portfolio, including investments in both public and private markets helps manage risk through changing market environments, helping support returns by reducing reliance on any single asset class.

We are carefully monitoring market conditions and geopolitical events to understand how they might impact future returns. However, we remain focused on long‑term structural themes — such as the energy transition, digitalisation and changing demographics — which we expect to drive investment returns over time.