Global markets staged a historic rebound over the June quarter of 2026, as the shock that defined the March quarter began to unwind. The Iran conflict, which had driven a sharp sell-off in equities and a surge in energy prices earlier in the year, moved toward de-escalation following a ceasefire memorandum signed in mid-June. Combined with resilient corporate earnings and a re-acceleration of the artificial intelligence capital expenditure cycle, this drove one of the strongest quarterly advances for equity markets in over five years.
Rather than a continuation of the stagflationary anxiety that characterised March, the period was defined by a rapid repricing of risk: a volatile and uncertain start in April gave way to a powerful, broadening rally through May and June, even as inflation remained stubbornly elevated and central banks turned more cautious on the pace of future easing.
Quarter defined by de-escalation, not resolution. The dominant theme of the June quarter was the gradual, uneven unwinding of the geopolitical shock that had rattled markets in the prior period. A ceasefire between the United States and Iran, agreed on 8 April and formalised through the Islamabad Memorandum of Understanding signed on 17 June, set in motion a 60-day negotiation period covering the Strait of Hormuz, sanctions relief, and Iran's nuclear programme. The de-escalation was not linear – renewed strikes around Beirut in early and mid-June briefly threatened to unravel the agreement – but the broad trajectory was one of reduced risk across energy and financial markets.
Brent crude, which had traded above US$120 per barrel in April, fell by roughly 30% over the quarter, the largest quarterly decline in oil since 2020, as shipping through the Strait gradually resumed. The unwinding of the energy shock allowed the disinflation narrative that had been disrupted in March to partially reassert itself, even as headline inflation readings remained elevated through the quarter on a lagged basis.
Equities: a historic rebound. Global equity markets delivered one of their strongest quarters of the past two decades. U.S. large caps rose approximately 15%, their best quarterly performance since the second quarter of 2020, while the Nasdaq Composite returned in the order of 20–25% as the artificial intelligence trade returned to the fore. U.S. hyper-scalers raised 2026 capital expenditure guidance for AI infrastructure to a combined figure approaching US$700 billion, and first-quarter earnings, reported through April and May, showed exceptional strength, with S&P 500 companies posting earnings growth of around 29% and roughly 85% of companies beating expectations.
Market leadership broadened materially as the quarter progressed. Having led the initial rebound off March lows, mega-cap technology names gave way to a wider rally: small caps, micro-caps and value benchmarks reached new highs, and the Philadelphia Semiconductor Index recorded its best quarter since inception in 1994, rising by more than 85%. Emerging markets were the standout region, surging around 24% in aggregate, their best quarterly gain since 2009, led by extraordinary moves in Korea and Taiwan on the back of semiconductor and memory-chip demand. European equities also performed strongly as falling energy prices supported sentiment, while the euro area's cyclically sensitive index posted its best quarter since 2020.
Australian equities participated in the broader risk-on move, supported by firm commodity prices and steady domestic policy settings, though gains were more measured than in the U.S. or Asian markets. Materials and gold miners featured among the standout performers earlier in the quarter, while financials and resources both contributed as global sentiment improved, before some late-quarter volatility returned amid renewed uncertainty around the durability of the Iran ceasefire.
Fixed income, credit, and real assets gripped by flux in inflation expectations. Fixed income markets lacked clear direction over the quarter, as investors weighed the disinflationary impulse from falling energy prices against still-elevated core inflation and a more hawkish tone from central banks. Government bond returns were broadly muted, with the global aggregate index posting only a modest gain. Credit markets were a relative bright spot, with spreads tightening across both investment grade and high yield segments on the back of robust corporate earnings.
Real assets diverged sharply from the prior quarter's pattern. Having been a primary beneficiary of the energy shock and safe-haven demand in March, gold suffered its worst quarterly performance in thirteen years, falling from an all-time high near US$5,589 an ounce in January to under US$4,030 by quarter-end, as easing geopolitical risk reduced safe-haven demand. Broader commodities also declined as the energy complex reversed sharply, with oil's retreat outweighing continued firmness in industrial metals such as iron ore and copper, which remained supportive for resource-exporting economies including Australia. In contrast, listed property performed strongly whilst listed infrastructure performed well but couldn’t match the pace of surging equity returns.
Macro: resilience amid a hawkish pivot. Economic data proved more resilient than feared at the start of the quarter, when recession probabilities had risen materially amid the war and oil near US$100 a barrel. U.S. GDP growth for the first quarter was revised up to 2.1%, and the labour market rebounded strongly following February's conflict-driven job losses, with the strongest three-month run of payroll gains in over two years. Inflation, however, remained a persistent concern: U.S. headline CPI and core PCE both pushed higher through the quarter, with core PCE reaching 3.4% by May, driven in part by the lagged pass-through of higher energy costs into broader prices.
Against this backdrop, the U.S. Federal Reserve held rates steady across the quarter, but the tone shifted decisively hawkish following the transition to new leadership under Chair Kevin Warsh, who used his first meeting to scrap forward guidance and signal a higher path for rates, with markets moving to price a rate hike later in the year. In Japan, the Bank of Japan delivered a widely expected hike to 1.0% amid strong wage growth, while the People's Bank of China held its benchmark rates unchanged for a thirteenth consecutive month as domestic demand indicators remained soft despite policy support.
In Australia, the policy backdrop tightened further before pausing. The Reserve Bank raised the cash rate by a further 25 basis points to 4.35% in May, the third consecutive increase this year and a cumulative 75 basis points of tightening since February, before holding rates unanimously at its June meeting. Governor Bullock characterised the hold as a pause rather than a pivot, with underlying inflation still running above target and the Board explicit that a further hike could not be ruled out. Headline inflation eased modestly to 4.2% in April from 4.6% in March but remained well above the 2–3% target band, while the unemployment rate ticked higher and household consumption and housing market momentum continued to soften under the weight of higher borrowing costs.
Politics, geopolitics, and a fragile peace. Geopolitics remained a central driver of markets, though the direction of travel reversed from the prior quarter. The signing of the Islamabad Memorandum on 17 June, formalising the end of hostilities between the United States and Iran, was the single most consequential development of the period, triggering the sharp decline in oil prices and a broader recovery in risk sentiment. The agreement set out a 60-day negotiating window covering the future governance of the Strait of Hormuz, sanctions relief, and a proposed US$300 billion reconstruction fund for Iran, though neither side characterised it as a final settlement.
The peace remained fragile throughout the quarter. Renewed Israeli strikes in Lebanon in early and mid-June, and a subsequent brief re-closure of the Strait by Iran, underscored how quickly the situation could deteriorate, and the Gulf Cooperation Council called for guaranteed free access through Hormuz and further action on Iran's missile programme. Elsewhere, political developments added further texture to the quarter: in the United Kingdom, a weakening Labour Party and the resignation of the prime minister fuelled speculation around fiscal policy and public debt, while in Australia, domestic budget measures affecting housing and taxation drew scrutiny from investors alongside the ongoing debate around monetary policy settings.
Summary & Outlook
The June quarter of 2026 demonstrated how quickly markets can reprice in the opposite direction once an acute shock begins to fade, with the rebound in risk assets proving broader and more durable than many anticipated when the quarter began. For investors, several lessons stand out: geopolitical shocks, while capable of driving sharp drawdowns, can also unwind quickly once de-escalation begins; earnings and structural themes such as the AI capital expenditure cycle can reassert themselves rapidly once macro uncertainty recedes; and gold's reversal after an extraordinary run is a reminder that safe-haven positioning can unwind as fast as it builds.
Looking ahead, the durability of the Iran ceasefire and the outcome of the 60-day negotiating period will remain central to the outlook, with the risk of renewed disruption to the Strait of Hormuz not yet fully retired. Equally important will be the path of monetary policy under a more hawkish Federal Reserve leadership and the Reserve Bank of Australia's next moves, given inflation in both economies remains above target. In this environment, maintaining diversification across and within asset classes, being alert to the risk of a further hawkish repricing in rates, and avoiding complacency after an exceptionally strong quarter remain key considerations as the cycle continues to evolve.
Source: US Bureau of Economic Analysis 9bea0, Goldman Sachs Global Investment Research
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