Economic review

First quarter of 2026: higher oil prices and volatile markets

The year started off strong. Share prices were high and interest rates remained stable. The outlook for the economy was positive. Large investments were also made in artificial intelligence (AI), which helped share prices rise. Tensions between countries caused turmoil in the financial markets in the first quarter of 2026. The Iran conflict and the blockade of the Strait of Hormuz pushed oil prices higher. Higher oil prices can push up retail prices (inflation), leaving consumers with less money left over.

In turbulent times, the dollar usually rises in value. This was not the case this quarter. Investors had more doubts about the US economic outlook and its domestic and foreign policy. The dollar thus declined in value.

At the end of the quarter, the European Central Bank (ECB) and the Federal Reserve (the US central bank) kept interest rates unchanged. Investors meanwhile demanded higher compensation for holding long-term bonds, so bond yields rose. Bond funds accordingly declined in value.